ITAT upholds deletion of Addition on TDS Portion of Loan Interest Expenditure as Revenue Lacks Counter-Evidence [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) has upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to delete the addition related to the TDS portion of interest expenditure on a loan, citing the revenue's failure to provide counter-evidence.

The income tax department filed the appeal challenging the CIT(A)s order. The ground for challenge was “Whether on the facts and circumstances of the case and in law the ld. CIT(A) has erred in deleting the disallowance of Rs. 3,95,014/- made on account of proportionate interest expenditure.”

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Ms. Neha Chaudhary, representing the department, staunchly defended the assessment order and urged the tribunal to overturn the CIT(A)’s findings. She argued that the assessee had not provided valid reasons for claiming an excessive amount of interest on the repayment of loans.

In contrast, Ved Jain, representing the assessee, robustly supported the CIT(A)’s conclusions. He explained that the interest paid on the loan during the Assessment Year ( AY ) 2019-20 amounted to ₹35,55,123. However, the total finance cost claimed for the year in question was ₹39,50,137, with the difference of ₹3,95,014 being the TDS portion.

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He further clarified that the assessee neither claimed nor paid any accrued interest beyond the loan repayment date of June 29, 2019. The CIT(A), after thoroughly examining the issue, directed the AO to delete the addition.

The tribunal reviewed the records indicating that for the assessment year under appeal, the assessee had claimed interest expenditure of ₹39,50,137 on a loan received from M/s. Smiti Holdings & Trading Pvt. Ltd., which was repaid in full along with interest during the relevant period. While the AO allowed interest of ₹35,55,123, he disallowed ₹3,95,014, which represented the TDS deducted and paid by the assessee on the loan. The CIT(A), upon review, ordered the deletion of this addition.

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The ITAT Bench, comprising Accountant Member Naveen Chandra and Judicial Member Vikas Awasthy, noted that the Revenue had failed to present any evidence contradicting the CIT(A)’s findings. Consequently, they found no fault in the CIT(A)’s decision and upheld it. As a result, the Revenue's appeal was dismissed.

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