Case Law Details
Bagadia Properties Private Limited Vs ITO (ITAT Bangalore)
It cannot be always presumed that the loans given to subsidiary companies are for business purposes. It is required to be proved that the subsidiary company has used the interest free loans for some business purposes.
Facts- The assessee is undertaking the business of real estate development and builders. The assessee filed its ROI for AY 2014-15 declaring a total income of Rs. 3,52,160. The AO disallowed part of interest expenses amounting to Rs. 1,50,73,571.
Notably, the assessee is following the “Project completion method” for disclosing income from the sale of flats. During the year under consideration, the assessee had completed three projects named Alta Vista, Soring Dale, and Villa Grande. One project named “Splendour” was under construction. The assessee had issued “Non-convertible Debentures” (NCD) amounting to Rs. 20.00 crores during the year under consideration. The said funds borrowed through the issue of NCDs have been utilized for general business purposes. The AO made out a disallowance to be made out of interest & professional charges on NCD at Rs. 1,50,73,751.
CIT(A) rejected all other contentions raised by the assessee. Aggrieved, the assessee filed appeal before the tribunal.
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