Loan Not Utilised for Business Purposes: ITAT upholds PCIT's Decision Directing AO to Verify Exemption u/s 14A [Read Order]
The tribunal upheld the PCIT order and confirmed that the deduction for interest on a loan was not allowable as the loan was not utilized for business purposes
![Loan Not Utilised for Business Purposes: ITAT upholds PCITs Decision Directing AO to Verify Exemption u/s 14A [Read Order]](https://images.taxscan.in/h-upload/2025/06/18/2050053-itat-kolkata-income-tax-act-tax-news-increases-in-short-term-loans-taxscan.webp "Loan Not Utilised for Business Purposes: ITAT upholds PCITs Decision Directing AO to Verify Exemption u/s 14A [Read Order]")
The Cochin Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the order of the Principal Commissioner of Income Tax (PCIT) and confirmed that the deduction claimed for interest paid on a borrowed loan was not permissible, as the loan was not used for business purposes.Stay Updated with the Latest Audit Report Formats & Audit Trials Requirements! Click...
The Cochin Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the order of the Principal Commissioner of Income Tax (PCIT) and confirmed that the deduction claimed for interest paid on a borrowed loan was not permissible, as the loan was not used for business purposes.
Stay Updated with the Latest Audit Report Formats & Audit Trials Requirements! Click here
Thiruvenkitam Veeriah Reddiar (assessee), represented through his legal heir Beena Veeriah Reddy, filed his income tax return for the Assessment Year (AY) 2020-21 on 15th February 2021, declaring a total income of Rs. 12,12,490.
The case was selected for scrutiny, and the Assessing Officer (AO) passed an assessment order under Section 143(3) of the Income Tax Act, accepting the returned income. The PCIT reviewed the assessment records and issued a notice on the grounds that the assessment order was erroneous and prejudicial to the interest of the revenue.
The PCIT observed that the AO failed to inquire into the interest claimed by the assessee as a business expense. The assessee submitted written arguments before the PCIT. However, the PCIT, after considering the submissions, held that the AO’s order was erroneous and prejudicial to the interest of the Revenue.
The PCIT held that the assessee was not eligible for deduction as the loan’s utilization was not for business purposes, and directed further verification regarding the applicability of Section 14A and the loan’s usage. Aggrieved by the PCIT’s order, the assessee filed an appeal to the ITAT.
The two-member bench comprising Inturi Rama Rao (Accountant Member) and Prakash Chand Yadav (Judicial Member) observed that the PCIT had partly set aside the AO’s order to verify the applicability of Section 14A and the utilization of the borrowed loan.
The tribunal observed that no prejudice would be caused to the assessee and also observed that if the assessee substantiated the claim during the remand proceedings no addition would be warranted. Therefore, the tribunal upheld it and dismissed the assessee’s appeal. The appeal of the assessee was dismissed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
