Section 94B of ITA, 1961 : Section 94B: Limitation On Interest Deduction In Certain Cases

ITA, 1961

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Explanation using Example

Let's consider a hypothetical scenario to understand the application of Section 94B of the Income-tax Act, 1961:

Imagine a company in India, 'TechPvtLtd', which is a subsidiary of a multinational corporation 'GlobalTechInc' based in the USA. 'TechPvtLtd' needs to borrow funds for its expansion plans and decides to take a loan from 'GlobalTechInc'. The interest payable on this loan is ₹2 crore per annum. 'TechPvtLtd' has an EBITDA (earnings before interest, taxes, depreciation, and amortisation) of ₹5 crore for the financial year.

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