The Delhi Bench Income Tax Appellate Tribunal ( ITAT ) has held that the house loan paid by a company allotted to the directors for residential purpose would be eligible for the Income Tax Deduction.
The assessee -Bhagat Motor Company Pvt. Ltd filed return of income and the assessee had claimed the expenses on account of interest on property loan in P&L account . but the Assessing Officer (AO) disallowed the same on the grounds that it was not incurred for the purpose of business or profession. The AO had also mentioned that the purpose of the loan was not clear whether it was for business or not.
Ajay Wadhwa, on behalf of the assessee submitted that the assessee had taken the loan for the purchase of two residential properties which had been allotted to two Directors for their residential purposes. He further submitted that the perquisite value on account of residence had been accounted in the income of the Directors and had also been offered for taxation.
Kanav Bali on behalf of the revenue submitted that the loan was not incurred for the purpose of business or profession and the purpose of loan was not clearly mentioned by the assessee as to whether it was for business or not.
The Delhi Bench of B. R. R. Kumar (Accountant Member) and Yogesh Kumar US (Judicial Member) allowed the appeal holding that the interest paid by the assessee company in connection with acquisition of fixed assets would be an allowable deduction observing that the perquisite value had been duly taxed by the assessee.
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