TaxTMI 
TaxTMI 
2025 (3) TMI 2029
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....the Revenue is reproduced as under: Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the disallowance of Interest u/s 36(1)(iii) amounting to Rs. 8,85,77,454/- without appreciating the facts brought out by the Assessing Officer that the proportionate disallowance of Interest claimed as expenditure should be made to the extent of Interest free loans given to Lokhandwala Infrastructure Put. Ltd. as the same is not incurred for the purpose of business? 4. Briefly stated, facts of the case are that the assessee filed return of income on 31.10.2017 declaring loss at Rs. 8,50,91,969/-. The return of income filed by the assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short 'the Act') were issued and complied with. In the assessment completed u/s 143(3) of the Act certain additions/ disallowances were made. On further appeal, the Ld. CIT(A) on the issue of proportionate disallowance of the interest amounting to Rs. 8,85,77,454/- allowed relief to the assessee. Aggrieved, the Revenue is in appeal before us by way of raising grounds as reproduced above. 5. Befor....
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....struction of its real estate project from India Bull Housing Finance Ltd. Out of total amount, an amount of Rs. 107.5 crore has been forwarded as interest free loan to its group concern i.e. Lokhandwala Infrastructure Pvt. Ltd for buying shares of the assessee from TC5 and thereby allowing the exit TC5. The Assessing Officer has disallowed the interest payment to India Bulls Housing Finance Ltd corresponding to the advance of Rs. 107.5 crores to Lokhanwala Infrastructure Pvt. Ltd. as an interest free loan. According to the Assessing Officer, it was a diversion of the funds for non-business purposes and therefore, the interest corresponding to the advance to Lokhandwala Infrastructure Pvt. Ltd. was liable to be disallowed invoking section 36(1)(iii) of the Act. But according to the Ld. CIT(A) said advance was for the purpose of the business need and survival of the company so that construction of the pending building could be completed. According to the Ld. CIT(A), the delay in getting further funds was adding to the interest cost of pending loans as well as legal action against the company. The Ld. CIT(A) also relied on the decision of the Hon'ble Supreme Court in the case of S....
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....frastructure Pvt. Ltd. had directly availed the loan, the interest expenditure would not have been allowable as the funds were utilized for capital investment. The contention of the assessee of extending interest free loan for substituting TC5 by Lokhandwala Infrastructure Pvt. Ltd as a shareholder was being a business need, is at all not convincing. No documentary evidence has been filed indicating of insufficient funds in the hands of Lokhandwala Infrastructure Pvt. Ltd or its inability of raising interest bearing funds from banks or market. From the circumstances of the case, it is evident that the substituting of the shareholding of TC5 through Lokhandwala Infrastructure Pvt. Ltd. was a mechanism devised by the assessee to claim an interest deduction on the Rs.107.5 crores loan, which otherwise would not have been permissible in the hands of Lokhandwala Infrastructure Pvt. Ltd. Furthermore, we note that the Assessing Officer has not disallowed the interest corresponding to the borrowings utilized by the assessee for its construction business being same incurred for the purpose of business. 6.3 In our considered opinion, the extension of an interest-free loan to Lokhandwala I....
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....e of Rs. 13,77,35,740/- u/s 40(a)(ia) of the Act from closing WIP in the hands of the appellant which is invalid and bad in the eyes of law. 2. The Ld. CIT(A) has erred in law and in facts in confirming the addition made u/s 43CA of the Act of Rs. 23,55,014/- which is invalid and bad in the eyes of law. 10. The ground No. 1 of the cross-objection was not pressed on behalf of the assessee and therefore, same is dismissed as infructuous. 10.1. As far as ground No. 2 is concerned, the Ld. counsel for the assessee submitted that addition made u/s 43CA of the Act amounting to Rs. 23,55,014/- is within the tolerance limit of +/- 10% and therefore, said addition is not justified. The difference between the stamp duty value and sale consideration of stock -in -trade of real estate property sold by an assessee is liable to be assessed as business income of the assessee. Before us, the Ld. counsel for the assessee referred to the decision of the Co-ordinate Bench of the Tribunal in the case of Wadhawana Housing and Infrastructure Company v. ACIT in ITA No. 3148/Mum/2022 dated 20.04.2023, wherein the section 43CA has been held to be retrospective in nature and accordingly toler....
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....the aforesaid decision was rendered in the context of Section 50C of the Act, the same analogy would apply for provisions of Section 43CA of the Act also as similar proviso is available in Section 43CA of the Act also. Hence, respectively following the aforesaid decision of this Tribunal, we hold that the difference of Rs. 4,42,460/- added by the ld. AO in the assessment falls below the tolerance band of 10% and hence, by applying the proviso to Section 43CA of the Act, no addition is required to be made in the instant case u/s.43CA of the Act. Accordingly, the ld. AO is hereby directed to delete the addition of Rs. 4,42,460/- made by him in the assessment. Accordingly, the grounds raised by the assessee are allowed." 9. Respectfully following the above said decision, and in the above decision the Coordinate Bench adjudicate that amendment made to section 43CA is retrospective in nature. Accordingly, as per the proviso the percentage up to 5% are outside the provisions of section 43CA of the Act. We observe that, the stamp duty value difference is 4.88% and the same outside the provisions of this section considering the fact the difference is less than 5%. From the above d....