Loan Repayment Not Taxable U/s 68 & 14A Disallowance Restricted to Actual Expenditure

DCIT Vs Prudential Hotels Pvt. Ltd. (ITAT Delhi)

The ITAT Delhi dismissed the Revenue’s appeal and upheld the CIT(A)’s order deleting addition of ₹7.70 crore made u/s 68 and restricting disallowance u/s 14A. The AO had treated repayment of “advance against equity” from certain parties as unexplained cash credits alleging lack of identity, genuineness and creditworthiness. However, the Tribunal noted that the amounts represented repayment of advances given in earlier years and not fresh credits during the year; therefore section 68 could not be invoked. The assessee had furnished supporting documents and the AO failed to submit any remand report despite opportunities, leading the Tribunal to accept the CIT(A)’s findings that primary onus was discharged.

On the issue of disallowance u/s 14A, the Tribunal observed that the assessee had not earned any exempt income and total expenditure debited to P&L was only ₹82,068. Hence, disallowance cannot exceed actual expenditure claimed and the CIT(A)’s restriction was upheld. Accordingly, both grounds raised by the Revenue were dismissed and relief granted to the assessee was sustained.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. The revenue has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT (A)”, for short] dated 30.10.2023 for the Assessment Year 2017-18.