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Nv Projects Private Limited ,Mumbai vs Deputy Commissioner Of Income Tax ... on 18 September, 2025
cites
Income Tax Rules, 1962
Eastern Investments Ltd vs Commissioner Of Income-Tax,West ... on 4 May, 1951
9. The Hon'ble Supreme Court in the case of Eastern Investments
Limited v. Commissioner of Income-tax (supra) had the occasion to consider
a situation where the company agreed to reduce its share capital by ₹ 50
lakhs and the shareholder agreed to forgo cash payment and agreed
instead to receive debentures of face value of ₹ 50 lakhs carrying interest
at 5% per annum. The claim of interest paid on such debenture as
expenditure was the subject matter of the quarrel before the Hon'ble
Court. The Hon'ble Supreme Court observed as under:-
Section 115QA in The Income Tax Act, 1961 [Entire Act]
Section 77 in The Companies Act, 1956 [Entire Act]
Deputy Commissioner Of Income-Tax vs Core Healthcare Ltd. on 25 April, 2001
as laid down in Section 37 of the Act ; but in the same section the portion in
parenthesis lays down that such expenditure has to be "not being expenditure of the
nature described in Sections 30 to 36". Therefore, there is a specific provision dealing
with interest paid/payable in respect of the borrowings incurred for the purposes of
business and hence the general provision viz., Section 37 of the Act cannot come into
play. Therefore, whether the interest is paid for a borrowing which is utilised for
acquisition of capital asset or which is utilised for a revenue purpose loses its
distinction and if that be so the stand adopted by the Revenue that in respect of
interest which is capitalised, after the commencement of the business but before an
asset is first put to use cannot be allowed as a revenue deduction under Section
36(1)(iii) of the Act is against the plain language of the provisions of the Act."
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