2026 (6) TMI 677

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....r 2022-23 wherein the appeal filed by the assessee against the assessment order passed on 23rd of March 2024 under section 143 (3) read with section 144B of the Income Tax Act, 1961 [the Act] by the National Faceless Assessment Centre [ld. AO] was dismissed. 02. The assessee challenges the order on the sole ground that the learned CIT(A) erred in law and on facts in upholding the AO's disallowance of bank loan repayments of Rs.16,386,245, on the assumption that the amount had already been claimed in an earlier year and allowing it again would result in double deduction. 03. Briefly, the assessee, a public charitable trust engaged in printing and publishing educational books, running educational institutions, and carrying out rural upl....

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.... assessee further explained that, while computing application of income, it had reduced the loan amounts from the total application in the years in which the loans were received, and therefore the repayment of those loans should be allowed as application of income in the years of repayment. The learned CIT(A), however, rejected the explanation, holding that Explanation 4 to section 11(1), inserted with retrospective effect, expressly prohibits treating application made out of borrowed funds as application of income unless the amount is reinvested or redeposited in the modes specified under section 11(5) within five years. The learned CIT(A) also held that the assessee had failed to furnish clear and conclusive evidence that the application ....

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....not to be treated as application of income for charitable or religious purposes. However, where such amount was not treated as application of income in the earlier year, the assessee is entitled to claim it as application in the year in which the loan or borrowing, or any part thereof, is repaid out of that year's income, to the extent of such repayment. 08. Considering the above legal provision, we have considered the submissions of both sides. The material facts are that the assessee obtained a loan of Rs.4 crores from HDFC Bank Ltd. on 2 February 2019 and a second loan of Rs.8,332,150 on 20 June 2020. The assessee's case is that, for AYs 2019-20 and 2020-21, it reduced the application of income shown in its accounts by the respective ....