https://www.taxtmi.com/caselaws?id=771054 ITAT Delhi allowed the assessee's appeal regarding disallowance of interest expenses under section 36(1)(iii). The AO had disallowed interest expenses claiming nexus between borrowed funds and non-current investment in subsidiary. However, ITAT held that Rule 8D(2) provisions apply only when exempt income is earned, which was absent here. The assessee had borrowed funds specifically for wind power plant installation with restricted repayment terms, while investment in group companies was made from interest-free funds and cash reserves. Since no direct nexus existed between borrowed funds and investment, and interest was incurred wholly for business purposes, the disallowance was deleted. en-us Fri, 16 May 2025 00:00:00 +0530 Tue, 20 May 2025 08:53:37 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=771054 ITAT Delhi allowed the assessee's appeal regarding disallowance of interest expenses under section 36(1)(iii). The AO had disallowed interest expenses claiming nexus between borrowed funds and non-current investment in subsidiary. However, ITAT held that Rule 8D(2) provisions apply only when exempt income is earned, which was absent here. The assessee had borrowed funds specifically for wind power plant installation with restricted repayment terms, while investment in group companies was made from interest-free funds and cash reserves. Since no direct nexus existed between borrowed funds and investment, and interest was incurred wholly for business purposes, the disallowance was deleted. Case-Laws Income Tax Fri, 16 May 2025 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=771054