Interest paid in respect of borrowings for acquisition of capital assets not put to use in concerned financial year can, be allowed as deduction under section 36(1)(iii)

[2012] 25 taxmann.com 281 (SC)

SUPREME COURT OF INDIA

Vardhman Polytex Ltd.

v.

Commissioner of Income-tax*

S.H. KAPADIA, CJI AND MADAN B. LOKUR, J.

CIVIL APPEAL NOS. 6438 AND 6443 OF 2012

SEPTEMBER 12, 2012

Section 36(1)(iii) of the Income-tax Act, 1961 - Interest on borrowed capital - Whether interest paid in respect of borrowings for acquisition of capital assets not put to use in concerned financial year can be allowed as deduction under section 36(1)(iii) - Held, yes [In favour of assessee]

CASE REVIEW

CIT v. Vardhman Polytex Ltd. [2008] 167 Taxman 93 (Punj & Har.) (FB) reversed.

CASES REFERRED TO

Dy. CIT v. Core Health Care Ltd. [2008] 298 ITR 194 / 167 Taxman 206 (SC) (para 2).

Ajay Vohra and Ms. Kavita Jha for the Petitioner. R.P. Bhatt, Ms. Niranjana Singh, Rahul Kaushik, Ms. Anil Katiyar and B.V. Balaramfor the Respondent.

ORDER

1. Heard learned counsel on both sides.

Leave granted.

The question which arises for determination in these civil appeals filed by the assessee is as follows:

"Whether interest paid in respect of borrowings for acquisition of capital assets not put to use in the concerned financial year can be permitted as allowable deduction under section 36(1)(iii) of the Income-tax Act, 1961?"

This question has been answered in favour of the assessee in the case of Dy. CIT v. Core Health Care Ltd. [2008] 298 ITR 194 / 167 Taxman 206(SC). Consequently, the civil appeals filed by the assessee are allowed with no order as to costs.