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Revenue cannot assume the role and occupy a product of a businessman to decide whether the expenditure is reasonable

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Court :
ITAT Delhi

Brief :
Aggrieved by the order dated 19.03.2018 passed by the Commissioner of Income Tax (Appeals)-6, Delhi ("Ld. CIT(A)") in thecase of M/s Mason Infrastructure Private Limited (“the assessee”), for the assessment year 2013-14, assessee preferred this appeal challenging the confirmation of the disallowance of the interest expenditure on the loan taken by the assessee to the tune of Rs. 1,35,25,521/-.

Citation :
ITA No.-3409/Del/2018

 IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: ‘E’ NEW DELHI

BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
&
SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER

ITA No.-3409/Del/2018
 (Assessment Year: 2013-14)

Mason Infrastructure Pvt.
Ltd., RZ-D-5, Mahavir
Enclave, New Delhi
PAN No. AAECM7250P
Appellant 

Vs.

DCIT, Circle 16(2)
New Delhi.
Respondent

Assessee by Ms. Hashneeta Matta, CA
Sh. Mahesh Kumar, CA
Revenue by Sh. Ramesh Kumar, SR DR

Date of hearing: 05/07/2021
Pronouncement on 23/07/2021

ORDER

PER K. NARASIMHA CHARY, JM

Aggrieved by the order dated 19.03.2018 passed by the Commissioner of Income Tax (Appeals)-6, Delhi ("Ld. CIT(A)") in thecase of M/s Mason Infrastructure Private Limited (“the assessee”), for the assessment year 2013-14, assessee preferred this appeal challenging the confirmation of the disallowance of the interest expenditure on the loan taken by the assessee to the tune of Rs. 1,35,25,521/-.

2. Brief facts of the case are that the assessee is a private limited company and is engaged in the business of purchase, sale and development of land and other real estate activities. For the assessment year 2013-14, they have filed their return of income on 29/09/2013 declaring a total income of Rs. 56,63,080/-. During the course of assessment, learned Assessing Officer found that the assessee had debited an amount of Rs. 1,35,25,521/-in the P&L Account on account of interest expense. Assessee informed that a loan of Rs. 27,69,25,000/-was taken by them from Orris Infrastructure Private Limited (OIPL) a group company, carrying an interest of Rs. 18% per annum as per the agreement entered into. Further, assessee submitted that out of this amount, a sum of Rs. 17 crores was given on loan to M/s M/S. ABW Infrastructure, which also carries interest at 18% per annum. According to the learned Assessing Officer in spite of several opportunities given, assessee failed to submitthe business uses details, except stating that they are engaged in the business of buying, selling, constructing properties/land etc. Learned Assessing Officer, therefore, observing that the claim of the assessee regarding interest cost of Rs. 1,35,25,521/- cannot be allowed becauseunder the provisions of the Income Tax Act, 1961 interest expense is allowable as business expenditure only when the assessee incurs it in respect of uses of loan for the purpose of business.

3. Aggrieved by such an action of the learned Assessing Officer,assessee preferred an appeal before the Ld. CIT(A) and submitted that asper the loan agreement between the assessee and the OIPL, the loan was obtained from OIPL for the purpose of business and utilisation of the loanis within the commercial mandate as per the terms of the agreement withOIPL; that the term “commercial expediency” is of wider term and has to be taken in the facts and circumstances of the case.

To know more in details find the attachment file

 

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on 05 August 2021
Published in Income Tax
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