https://www.taxtmi.com/caselaws?id=17858 HC held in favour of the assessee, ruling that the Tribunal's conclusion that part of the borrowed funds was diverted to non-business purposes was a legal inference, not a finding of fact, and was unsustainable. The HC clarified that notional depreciation adjustments and resulting partner debit balances do not, by themselves, establish diversion of borrowed capital. Once the statutory conditions under section 36(1)(iii) of the Income-tax Act, 1961 are satisfied-namely borrowing of capital, its use for business purposes, and liability to pay interest-the assessee is entitled to deduction. Accordingly, the assessee's claim for interest on the borrowings was allowed, and the Tribunal's contrary view was set aside. en-us Fri, 20 Dec 1996 00:00:00 +0530 Sun, 14 Dec 2025 23:49:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=17858 HC held in favour of the assessee, ruling that the Tribunal's conclusion that part of the borrowed funds was diverted to non-business purposes was a legal inference, not a finding of fact, and was unsustainable. The HC clarified that notional depreciation adjustments and resulting partner debit balances do not, by themselves, establish diversion of borrowed capital. Once the statutory conditions under section 36(1)(iii) of the Income-tax Act, 1961 are satisfied-namely borrowing of capital, its use for business purposes, and liability to pay interest-the assessee is entitled to deduction. Accordingly, the assessee's claim for interest on the borrowings was allowed, and the Tribunal's contrary view was set aside. Case-Laws Income Tax Fri, 20 Dec 1996 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=17858