IN THE HIGH COURT OF DELHI AT NEW DELHI 
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         ITA 525/2008  
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 SIKKA STEEL and HEAT TREATMENT 
 CENTRE NEW DELHI                                 ..... Appellant 
 Through Mr. Satyen Sethi, Adv. 
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 versus 
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 COMMISSIONER OF INCOME TAX DELHI 
 and ANR                                                     ..... 
 Respondent 
 Through Mr. R.D. Jolly, Adv. 
 CORAM: 
 HON'BLE MR. JUSTICE MADAN B. LOKUR 
 HON'BLE MR. JUSTICE MANMOHAN SINGH 
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 O R D E R 
                               25.04.2008 
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 The Assessee is aggrieved by an order dated 28th April, 2006 passed by 
 the Income Tax Appellate Tribunal, Delhi Bench ?F?, New Delhi (the Tribunal) in 
 ITA No.446/Del/2003 relevant for the Assessment Year 1998-99. 
 The Assessee is a partnership concern and it had taken certain overdraft 
 facilities from the bank as well as certain unsecured loans.  The Assessee 
 claimed a deduction on account of interest paid to the bank under Section 
 36(1)(iii) of the Income Tax Act, 1961 (the Act).  It was noted that the 
 partners of the firm had borrowed huge amounts from the capital of the 
 partnership firm. 
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 The Tribunal noted that for availing the benefit of deduction on account 
 of interest under Section 36(1)(iii) of the Act, the Assessee has to satisfy 
 three conditions, that is, (i) money must have been borrowed by the Assessee, 
 (ii) it must have been borrowed for the purpose of business and (iii) the 
 Assessee must have paid interest on the said amount.  The Tribunal noted that 
 the dispute in the present case is with regard to the second item, which 
 pertains to the utilization of the money borrowed for the purposes of the 
 Assessee?s business. 
 All the three authorities below have held that the Assessee did not have 
 any funds of its own and almost the entire funds were borrowed by it on interest 
 either from the bank or from other parties and a substantial amount of this 
 borrowed capital, to the extent of Rs.23 lakhs, was withdrawn by the partners on 
 their capital account, the only source of which was the borrowed funds.  Under 
 these circumstances, it was held that the partners had withdrawn amounts from 
 borrowed funds of the Assessee.  It is for this reason that it was held that one 
 of the conditions of Section 36(1)(iii) of the Act was not satisfied and, 
 therefore, the Assessee was not entitled to the deduction claimed. 
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 We are of the opinion that no fault can be found in the conclusion that 
 has been arrived at by the Tribunal on the above facts or in holding that the 
 Assessee was not entitled to a deduction under Section 36(1)(iii) of the Act. 
 We do not find any perversity in the view that has been taken by all the three 
 authorities below. 
 No substantial question of law arises. 
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 Dismissed. 
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 MADAN B. LOKUR, J 
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 MANMOHAN SINGH, J 
 APRIL 25, 2008 
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 ITA No.525/2008                                                        Page 3 of 
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