G.S. Pharmbutor Pvt. Ltd. appealed against the disallowances of interest expenses under section 36(1)(iii) related to investments in convertible debentures and capital work in progress. The case highlights critical aspects of tax law interpretation concerning the deductibility of interest expenses.
The appeal was triggered by substantial disallowances made by the AO, which were partially upheld by the CIT(A). The Tribunal’s detailed examination revolved around the proper allocation and deduction of interest expenses linked to business operations and capital expenditures.
The Tribunal referenced a prior decision in the appellant’s case from A.Y. 2015-16, emphasizing the consistency needed in judicial reasoning. It questioned the rationale used by the CIT(A) and remanded the matter for a detailed reassessment of the interest disallowance, considering the specific use of borrowed funds and the availability of the appellant’s own funds.
The decision to remand the case back to the AO for a precise computation underlines the necessity for accuracy in the tax assessments of corporate expenditures. The ruling is significant for its implications on how companies should manage their capital and revenue expenditures in relation to tax liabilities.
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