2015 (2) TMI 1203

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....yaraghavan, Advocate Respondent by : Shri N. Rengaraj, CIT O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: The assessee has filed this appeal challenging the validity of revision order dated 22.03.2013, passed by Ld. Commissioner of Income Tax-I, Coimbatore and it relates to assessment year 2008- 09. 2. We heard the parties and perused the record. The assessment in the hands of the ....

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....ad treated the dividend declared on preference shareholders as advances recoverable. On the basis of these facts, the Ld. CIT took the view that the assessee has used borrowed funds for declaring dividend on preference shareholders. Accordingly, the Ld. CIT took the view that the interest on loans relatable to dividend so declared is not allowable as deduction under Section 36(1)(iii) of the Act. ....

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....us during the year under consideration. The Ld. counsel further submitted that the Ld. CIT was not right in law for presuming that the interest on borrowings, if any made, for disbursing the dividend income is not allowable as expenditure. He submitted that in the following cases, it has been held that the interest paid on amount borrowed for payment of dividend is allowable as deduction:- ....

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.... 5. Having heard the rival submissions, we are of the view that there is a merit in the contentions of the Ld. counsel. We have already noticed that the Ld. CIT has passed the impugned revision order only on the reasoning that the interest on borrowings, if any made, for disbursing dividend is not allowable as deduction under Section 36(1)(iii) of the Act. However, the various case laws relied on....