https://www.taxtmi.com/caselaws?id=448014 ITAT Chennai allowed the assessee's appeal regarding disallowance of interest under section 36(1)(iii). The tribunal held that interest paid on loans borrowed to settle outgoing partners' capital accounts constitutes business expenditure, not family settlement. The partnership firm operated a hotel and borrowed from Punjab National Bank to pay retiring partners their proportionate share in firm assets. Since settling partners' capital accounts is necessary for smooth business operations and represents firm debt, interest on such borrowed funds qualifies for deduction under section 36(1)(iii). The AO's addition was directed to be deleted. en-us Fri, 15 Dec 2023 00:00:00 +0530 Tue, 09 Jan 2024 11:40:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=448014 ITAT Chennai allowed the assessee's appeal regarding disallowance of interest under section 36(1)(iii). The tribunal held that interest paid on loans borrowed to settle outgoing partners' capital accounts constitutes business expenditure, not family settlement. The partnership firm operated a hotel and borrowed from Punjab National Bank to pay retiring partners their proportionate share in firm assets. Since settling partners' capital accounts is necessary for smooth business operations and represents firm debt, interest on such borrowed funds qualifies for deduction under section 36(1)(iii). The AO's addition was directed to be deleted. Case-Laws Income Tax Fri, 15 Dec 2023 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=448014