Case Law Details
Brahmaputra Property Hub Private Limited Vs ITO (ITAT Guwahati)
Appeal filed at the instance of the assessee is directed against the order of the Learned Principal Commissioner of Income Tax, Guwahati – 1, passed u/s 263 of the Income Tax Act, 1961 (in short ‘the Act’) dt. 30/03/2023, for Assessment Year 2018-19.
During the course of revisionary proceedings, it was stated by the assessee that secured loan was taken from SREI Infrastructure Finance Ltd. (in short “SREIIFL”) for the purpose of executing real estate and commercial business. Since the business was in the initial stage, the borrowed funds were advanced to M/s. M.L. Singhi, so as to avoid NPA account and generated interest income which gave effect to 95% of the interest repayment liability towards SREIIFL. It was also claimed by the assessee that the interest payments was @ 14.21% and the interest income from M.L. Singhi was @ 13.96% and in view of the commercial expediency as held by the Hon’ble Apex Court in the case of S.A. Builders Ltd. Vs. Commissioner of Income Tax (Appeals)” (2007) 288 ITR 0001, claim of expenditure was rightly allowed by ld. Assessing Officer.
Pr. CIT after dealing with the issue elaborately came to the conclusion that since there was no business activity during the year and the borrowed funds were utilized to the third party without any commercial expediency, interest expenditure claimed at Rs.1,04,83,749/- should not have been allowed by the Assessing Officer. He thus held the order of the Assessing Officer to be erroneous, so far as prejudicial to the interest of the revenue.
Counsel for the assessee submitted that the issue has been examined by the Assessing Officer and a plausible view has been taken and consequently he submitted that for commercial expediency, the idle funds were utilised for reducing the loss of the company. He thus prayed that the impugned order deserves to be quashed as the order of the Assessing Officer dt. 23/02/2021 is neither erroneous nor prejudicial to the interest of the revenue.
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