No Sec. 24 deduction for interest paid on loan in absence of evidence: ITAT

Case Details: Netra Software Technologies (P.) Ltd. v. ACIT (CPC) - [2022] 138 taxmann.com 309 (Bangalore-Trib.)

Judiciary and Counsel Details

• • Chandra Poojari, Accountant Member & Smt. Beena Pillai, Judicial Member
  • Smt. Sheetal Borkar, Adv. for the Appellant.
  • Smt. Priyadarshini Mishra, Addl. CIT (DR) for the Respondent.

Facts of the Case

Assessee-company filed a loss return for the Assessment Year 2011-12. Later, it revised the return to claim deduction of interest paid on loan taken for construction of commercial proper. The deduction was claimed under section 24 while computing loss under the head ‘income from house property.

While processing the return, the CPC reduced the claim of loss by disallowing deduction towards interest. The order of CPC was further confirmed by the CIT(A). Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that the assessee claimed interest on loan borrowed for the purpose of construction of the commercial building. The assessee claimed that building construction had been completed and it was ready to let out and the assessee always had the intention to let out the property.

However, due to market conditions, the assessee failed to let out and failure to let out cannot be attributable to the assessee.

It should be noted that the assessee had not placed any iota of evidence to suggest that the commercial building was ready to let out and the assessee had taken any steps to let it out. Unless and until the building is ready to let out, the interest incurred by the assessee on the loan borrowed for the construction of the building has to be capitalized.

There was no evidence to suggest that the commercial building was ready in all respects by getting the power connection, water connection, occupation certificate, clearance from the fire fighting department, etc. Thus, it cannot be presumed that the building was ready to let out and the assessee had taken any steps to let out.

The whole plea of the assessee to let out the property was only on the presumption basis without any specific evidence on record to suggest that the assessee had taken steps to let out the property. Accordingly, the lower authorities were justified in disallowing the claim of the assessee with regard to interest borrowed on loan used for construction of building.

List of Cases Referred to

• • Ms. Priyananki Singh Sood v. Asstt. CIT [2019] 101 taxmann.com 45/174 ITD 371 (Delhi – Trib.) (para 4).