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of <h1>Tribunal Rules in Favor of Appellant on Interest Deduction Dispute</h1> <h3>DCIT, Circle-3 (2) New Delhi Versus M/s Avantha Realty Ltd.</h3> DCIT, Circle-3 (2) New Delhi Versus M/s Avantha Realty Ltd. - TMI Issues involved:- Deduction of interest u/s. 24- Disallowance u/s. 14ADeduction of interest u/s. 24:The appeal involved a dispute regarding the deduction of interest claimed under section 24(b) of the Income Tax Act, 1961. The appellant had acquired properties from another entity, incurring a debt of Rs. 64,00,00,000. The appellant paid interest of Rs. 6.4 Crores on the outstanding amount, claiming it as a deduction under section 24(b) as 'income from house property.' The Assessing Officer disallowed the deduction, arguing that the unpaid purchase amount had not been paid despite years passing since the transaction. However, the CIT(A) disagreed, stating that interest on the unpaid amount to the seller was akin to interest on borrowed capital, making the appellant eligible for the deduction. The CIT(A) also noted that the deduction had been allowed in previous years. The Tribunal agreed with the CIT(A), emphasizing that the interest paid by the appellant was allowable as it constituted interest on borrowed capital, citing relevant court judgments supporting this interpretation.Disallowance u/s. 14A:The issue of disallowance under section 14A for computing book profit under section 115JB was also addressed. The appellant argued that the disallowance should not exceed the exempt income earned, a contention accepted by the Tribunal. Regarding the consideration of disallowance of expenses under section 14A for computing book profit under section 115JB, the Tribunal held that as per the Explanation to Section 115JB, the disallowance under section 14A is a notional disallowance. Therefore, the amount disallowed under section 14A cannot be added back to the book profit under section 115JB. The Tribunal directed the Assessing Officer to re-compute the profits based on these principles. Ultimately, all the appeals of the Revenue were dismissed by the Tribunal in this judgment delivered on 25/10/2021.
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