Revision order for assessment year 2014-15 quashed as loan processing fee not interest.

The Tribunal found that the revision order under section 263 for the assessment year 2014-15 was legally unsustainable. The Tribunal held that the loan processing fee did not qualify as interest under section 2(28A) and that the discrepancy in interest rates between the loan borrowed and the related party loan did not warrant disallowance. As a result, the Tribunal allowed the assessee's appeal and quashed the revision order, emphasizing the need for the revision order to align with the law.

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Issues:
Challenge to revision order u/s 263 for AY 2014-15 - sustainability in law.

Analysis:
1. The assessee appealed the revision order dated 28.03.2019 by ld. PCIT-1, Jodhpur u/s 263 for AY 2014-15, claiming it to be legally unsustainable.
2. The original assessment completed by the AO was questioned by ld. PCIT due to alleged errors and prejudicial actions concerning 4 issues, ultimately focusing on two issues: disallowance u/s 40(a)(ia) for loan processing fee and disallowance of interest on a related party loan.
3. Regarding the first issue, ld. PCIT deemed the loan processing fee as interest under sec. 2(28A) of the Act, hence disallowing it u/s 40(a)(ia) due to lack of TDS deduction.
4. Concerning the second issue, ld. PCIT found fault with the interest rate difference between the loan borrowed and the related party loan, directing a disallowance from the interest paid to GRUH Finance Ltd.
5. The assessee challenged these decisions, arguing that the loan processing fee did not qualify as interest under sec. 2(28A) and that the related party loan interest rate was a separate transaction, not warranting disallowance.
6. The ld. A.R contended that the ld. PCIT's interpretations were legally flawed, citing precedents and asserting the independent nature of the lending transactions.
7. The ld. D.R supported ld. PCIT's orders, emphasizing the fee's interest nature and the alleged imprudence in the related party loan interest rate.
8. The Tribunal analyzed the issues, finding that the loan processing fee, being pre-loan, did not meet the interest definition under sec. 2(28A) and that the related party loan interest rate discrepancy did not justify disallowance.
9. Citing legal precedents and the lack of statutory basis for disallowance, the Tribunal concluded that ld. PCIT's decisions were legally unsound, leading to the quashing of the revision order.
10. Referring to the necessity of ld. PCIT's views aligning with the law, the Tribunal deemed both issues unsustainable in law, thus allowing the assessee's appeal and quashing the revision order.

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