Shantiben K Rita Vs ITO (ITAT Mumbai)
In a significant ruling for taxpayers, the Income Tax Appellate Tribunal (ITAT) Mumbai bench has overturned an order that had restricted interest expenditure claimed by an individual assessee. The ITAT emphasized that commercial decisions taken by a taxpayer must be evaluated from their own perspective, rather than that of the Income Tax Department. The decision, delivered on January 6, 2025, in the case of Shantiben K Rita Vs. Income Tax Officer (ITO), for Assessment Year 2020-21, sets aside the disallowance of Rs. 60,53,499/- in interest expenses.
The appeal was filed by Ms. Shantiben K Rita against an order dated May 29, 2024, passed by the Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre, Delhi, which had upheld the Assessing Officer’s (AO) addition.
Background of the Dispute
Ms. Shantiben K Rita, an individual and partner in two partnership firms, filed her return of income for the Assessment Year 2020-21, declaring a total income of Rs. 11,94,710/-, including income from salary, business and profession, and other sources. Her return was selected for scrutiny, primarily to verify a substantial deduction claimed under Section 57 of the Income Tax Act, 1961.
During the assessment proceedings, the assessee provided details indicating she had incurred interest expenses of Rs. 1,43,17,550/- on various loans availed. Out of this, Rs. 1,15,89,437/- was claimed as a deduction under Section 57 of the Act against interest income of Rs. 1,17,15,147/- declared under the head “income from other sources.” The remaining interest expenditure of Rs. 27,28,113/- was claimed against business income.
