TaxTMI 
TaxTMI 
2026 (9) TMI 870
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....r dated 19.09.2022 for consideration of the following substantial question of law: "Whether in the facts and circumstances of the case, the Hon'ble ITAT has erred in law and on facts in holding that the assessee is eligible for deduction of the interest expenditure incurred for the purpose of investment in shares as business expenditure under the provisions of Section 36(1)(iii) of the Income Tax Act, 1961, without appreciating that the interest paid to holding company which was incurred on the funds borrowed for making investment in shares in another company cannot be said to be incurred for the purpose of the business of the assessee and as such the same is not allowable either under the provisions of section 36(1)(iii)/37(1) of ....
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....rest expense cannot be allowed under Section 36 (1)(iii) of the Act and accordingly, the CIT (Appeals) following the earlier years, held that the interest expenses cannot be allowed as deduction under Section 36 (1)(ii) or Section 57(i) of the Act and made addition of the interest paid to GFL of Rs. 8,60,16,920/- to the total income of the assessee. 10. Being aggrieved by the order of the CIT (Appeals), the assessee preferred an appeal before the Tribunal, the Tribunal recorded the following undisputed facts: "i. The assessee and FIL, both are engaged in the business of exhibition of cinematographic films in multiplex cinema and single screen cinema. ii. The assessee company acquired 1,75,65,288 share of FIL during F.Y.....
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....ess System vs. Commissioner of Income Tax, reported in (2026) 484 ITR 509 (SC) wherein, the Hon'ble Apex Court, after considering the similar facts, has held as under: "39. Adverting to the facts of this case, we find that the respondent assessee had claimed interest on borrowed funds under Section 36(1)(iii) of the Act which was utilized for investment in M/S Ceylon Glass Company Ltd., a subsidiary company of the assessee. The investment was made for controlling the interest in the associate concern by purchase of shares. Thus the investment was clearly for commercial expediency. We agree with the finding recorded by the ITAT and affirmed by the High Court that assessee is entitled to claim allowance of interest on the funds inves....