HARISH PURSOTTAMDAS MORWANI,SABARKANTHA vs. ITO WARD-1 MODASA, MODASA

ITA 1365/AHD/2026Status: DisposedITAT Ahmedabad22 September 2026AY 2018-20194 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the assessee failed to establish exclusive business use of borrowed funds, a complete disallowance was not justified. Therefore, the disallowance was restricted to Rs. 1,14,662/- on a pro-rata basis.

What were the facts?

The assessee availed a cash credit loan of Rs. 2 crores for working capital but diverted Rs. 80 lakhs to a third party. The Assessing Officer disallowed bank interest and charges amounting to Rs. 2,86,654/- as the borrowed funds were not used exclusively for business purposes.

What were the issues?

Whether interest-bearing borrowed funds diverted to a third party can be considered for business purposes, and if not, to what extent expenses related to such funds should be disallowed.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH

Before: Shri Sanjay Garg & Shri R. Govindarajan

For Appellant: Shri Kunal Shangvi, A.R
For Respondent: Ms. Madhulika Satpute, Sr. D.R

PER R. GOVINDARAJAN, ACCOUNTANT MEMBER:

The assessee has filed the appeal against the order dated 20-02- 2026 passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre NFAC (in short, referred to as the CIT(A)) u/s. 250 of the Income Tax Act, 1961 (herein referred to as “the Act”) relating to Assessment Year 2018-19. 2. The assessee has raised following grounds of appeal:- “[1] The Ld. CIT(A), NFAC, Delhi was grievously erred in upholding the addition of Rs. 2,86,654/- made by the Ld. A.O. being bank interest and bank charges by partly allowing the appeal is illegal and bad in law. Harish Pursottamdas Morwani, A.Y. 2018-19

The appellant submits t

The order continues below.

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