The ITAT, Bangalore bench, in a recent ruling confirmed the finding of the Commissioner of Income Tax (Appeal) that the interest paid by the assessee on account of investing in properties are capital in nature.
In the instant case, the assessee’s claim for expenditure on the above was disallowed by the assessing officer by holding that the assessee has neither proved that interest was not incurred for the investment in property nor that it has utilized interest free fund if any available for investment in acquiring various properties. Accordingly, he disallowed the amount of interest paid on the same. The approached the Income Tax Appellate Tribunal challenging the orders of both the authorities.
The Tribunal found that the assessee has shown the stock in trade of land separately from the investment in land.Concurring with the findings of the lower authorities, the Tribunal observed that “The Assessing Officer has considered the amount of investment in land of Rs.21.84 Crores and therefore the contention of the assessee that this investment in land is also part of the business activity of the assessee is not borne from the facts recorded in the books of accounts and financial statements. It is pertinent to note that when the assessee has not shown the income from sale of these investment as business income then the interest expenditure on account of investment in land cannot be allowed against the business income. Accordingly, we do not find any error or illegality in the orders of the authorities below.”
Read the full text of the order below.