The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has held that the expenses incurred on financial charges can be deductible from Business Income as the same would amount to business expenditure.
In the instant case, both the Assessing Officer and the first appellate authority treated the land as capital asset and accordingly, capitalized the interest on the loan, processing fee and bank charges etc. incurred for purchase of land.
On second appeal, the Tribunal held that “The issues raised by the assessee for the A.Y. 2005-06 are common to the issue raised in the appeal for A.Y. 2004-05, accordingly in view of our finding on these issues that the expenditure incurred by the assessee on account of financial charges are an allowable business expenditure and consequently the losses brought forward from the assessment year 2005- 06 would be set off against the income if any for the A.Y. 2005-06. The Assessing Officer is directed to allow the claim of carry forward of loss for setting off against the income of the succeeding year. Hence, in this year also, we set aside the order of the ld. CIT(A).”
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