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The Supreme Court in National Co-operative Development Corporation v CIT in ITA Nos 505-07 of 2009 dated 11.9.20 held that In the matter of allowance of business deduction the source of funds from which the expenditure is made is not relevant. It is also not really relevant as to whether the expenditure is incurred out of the corpus funds ( capital receipt)  or from the interest income ( revenue receipt) earned by the appellant-Corporation.

This case involved deduction for non refundable grants out of corpus funds received from the Central Government by a pass through entity.

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