Rup Kumar Ramchandani Vs ITO (ITAT Jaipur)
Interest on Unused Commercial Property Not Business Expense, but Allowable u/s 24(b): Jaipur ITAT Grants Alternative Relief
The Jaipur Bench (SMC) of the ITAT partly allowed the appeal for statistical purposes in the case of Rup Kumar Ramchandani vs. ITO, Ward-1(2), Ajmer, ITA No. 1258/JPR/2025, AY 2019-20, vide order dated 18.12.2025.
The Assessee had claimed interest expenditure of ₹11.82 lakh, out of which ₹6.71 lakh was disallowed by the AO u/s 36(1)(iii) on the ground that the borrowed funds were used to acquire a commercial property at Miraz Mall, Ajmer, which was not proved to be put to use for business purposes during the year. The disallowance was confirmed by CIT(A).
Before the Tribunal, the Assessee failed to establish actual business use of the property in the relevant year and conceded that the claim u/s 36(1)(iii) could not be sustained. Accordingly, the ITAT upheld the disallowance of interest as business expenditure.
However, the Tribunal accepted the alternative plea of the Assessee that since the commercial property was not used for business, its annual value was chargeable under the head “Income from House Property”, and therefore, interest on borrowed capital was allowable u/s 24(b). The ITAT held that deduction u/s 24(b) is a statutory entitlement, irrespective of actual letting, once annual value is computed u/s 23.
The matter was restored to the AO with directions to compute the annual value of the property as per law and allow deduction of interest u/s 24(b) after granting due opportunity to the Assessee.
Accordingly, the appeal was allowed for statistical purposes, granting alternative relief to the Assessee.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
