2014 (12) TMI 520

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....ial questions of law:              [1] Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that interest paid on funds borrowed for purchase of shares of India Polyfibres Ltd., a BIFR Company, is not deductible under Section 36(1) (iii) of the Income-tax Act, 1961 ?              [2] Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that legal and professional charges of Rs. 7,81,000/- incurred for rehabilitation and revival of India Polyfibres Ltd., a BIFR Company, was not ex....

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.... by the CIT(A) in para 3.2 and has also taken us through section 36(1)(iii) and section 37 of the Income-tax Act, 1961. 5. Mr. Shah learned advocate appearing for the appellant has also taken us through clause 43, which reads as under:              "43. To carry business of an investment company and to invest in and acquire and hold and otherwise deal in shares, stocks, debentures, debenture-stocks, bonds, obligations and securities issued or guaranteed by any company or Private Industrial Enterprises or Government and in diamonds, jewellery, pearls, silver, gold,ornaments, akiks, paintings and antiques." 6. Mr. Shah learned advocate has relied on the decision of the Hon'b....

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....d that there is sufficient force in the contention put forth by the Authorised Representative of the appellant. The Hon'ble Supreme Court in the case of Madhav Prasad Jatia v. CIT reported in 118 ITR 200, has held that at the time of allowing interest u/s 36 of the IT Act, 1961, three conditions are required to be seen for allowing deduction in respect of the borrowed funds for the purpose of business.         a) Capital should be borrowed by the assessee b) It must be borrowed for the purpose of business         c) Interest must have been paid.     In the instant case the appellant company has fulfilled all the above conditions. Further in the cas....