| Case ID |
15b2990d-efee-4fe1-b67f-a43a5e436bb7 |
| Body |
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| Case Number |
C. A. No.3428 of 1991 |
| Decision Date |
Feb 03, 1999 |
| Hearing Date |
|
| Decision |
The Supreme Court upheld the Tribunal's decision allowing the deduction of interest paid on borrowed capital for machinery that was treated as a business asset, even if it had not been used in the business during the relevant accounting year. The Court found that the machinery was purchased for the purpose of the business and therefore, the interest on the loan taken for its purchase was deductible. The appeal by the Revenue was dismissed, confirming the Tribunal's reasoning that the interest paid on the amount borrowed for the purchase of such machinery is a deductible amount. |
| Summary |
In the landmark case of C. A. No.3428 of 1991, the Supreme Court of India addressed the deductibility of interest on borrowed capital under the Income Tax Act, 1961. The case involved the Commissioner of Income Tax versus Associated Fibre and Rubber Industries (P.) Ltd, where the Tribunal had previously ruled in favor of the respondent, allowing the deduction of interest paid on loans for machinery not yet put to use. The Supreme Court affirmed this decision, emphasizing that machinery treated as a business asset, even if unused in a given accounting year, justifies the deduction of interest. This ruling is pivotal for businesses claiming interest deductions on loans for capital assets, reinforcing the understanding that the intent and purpose of the asset acquisition are crucial in tax assessments. The judgment clarifies the interpretation of sections 36 and 256 of the Income Tax Act, 1961, ensuring that entities can plan their tax strategies effectively. Keywords include 'Income Tax Act', 'deductibility of interest', 'business assets', and 'Supreme Court rulings' - all of which are trending topics in financial and legal discussions. |
| Court |
Supreme Court of India
|
| Entities Involved |
ASSOCIATED FIBRE AND RUBBER INDUSTRIES (P.) LTD
|
| Judges |
M. Srinivasan,
U. C. Banerjee
|
| Lawyers |
S. Rajappa,
B. K. Prasad,
Anil Kumar Jha
|
| Petitioners |
COMMISSIONER OF Income Tax
|
| Respondents |
ASSOCIATED FIBRE AND RUBBER INDUSTRIES (P.) LTD
|
| Citations |
1999 SLD 464,
1999 PTD 3176,
(1999) 236 ITR 471,
(1999) 80 TAX 257
|
| Other Citations |
Not available
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
36,
256
|