Loans from IPO Proceeds, Not Borrowed Funds: ITAT directs AO to recompute Interest Disallowance

The ITAT ruled that loans raised from IPO proceeds cannot be classified as borrowed funds for the purpose of interest disallowance. The case involved a taxpayer who had raised funds through an initial public offering (IPO) and used them for business operations. The AO had attempted to disallow interest on these funds, but the ITAT clarified that IPO proceeds are not considered borrowed funds under tax laws. The ruling ensures that interest on such funds is not disallowed for tax purposes, provided it is used for the company’s legitimate business needs.