Prakash Katariya Vs ITO (ITAT Pune)
The appeal before the Income Tax Appellate Tribunal, Pune Bench concerned disallowance of interest expenditure claimed by an individual assessee for Assessment Year 2020–21. The assessee had filed a return declaring a business loss, largely attributable to interest expenses of ₹46,24,948 debited to the Income and Expenditure Account. During limited scrutiny, the Assessing Officer noted that the interest related to loans classified as housing loans sanctioned by L&T Finance Home Loans for a property at Aundh, Pune. The loan accounts showed different borrowers and co-borrowers, and the assessee was not the sole borrower in both cases. The Assessing Officer further observed that the property for which interest was claimed did not appear as a business asset in the assessee’s balance sheet and that no satisfactory evidence was furnished to establish business use. Consequently, the entire interest claim was disallowed and added to income.
Before the CIT(A)/NFAC, the assessee argued that although the loans were sanctioned as home loans, the funds were fully utilised for constructing a commercial business asset, namely a clinic, which was used for the assessee’s professional activities. It was also stated that the EMIs were paid by the assessee and the premises were used as a clinic. However, the CIT(A)/NFAC was not satisfied, noting discrepancies between the loan amounts and the value of clinic premises reflected in the balance sheet. In the absence of documentary proof establishing that the borrowed funds were used for business purposes, the disallowance was upheld.
