VENKATESWARA RAO PRATHI,KAKINADA vs. ACIT, CENTRAL CIRCLE-2, RAJAHMUNDRY

ITA 748/VIZ/2025Status: DisposedITAT Visakhapatnam19 August 2026AY 2018-199 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had sufficient own capital to cover the advance to his son, and the loan was not taken during the relevant financial year. Therefore, there was no proximity between the borrowed funds and the advance, and the interest disallowance was incorrect.

What were the facts?

The assessee advanced a significant sum to his son for property purchase, claiming interest expenditure on bank loans taken for business. The Assessing Officer disallowed the interest, alleging diversion of interest-bearing funds for non-business purposes.

What were the issues?

Whether interest expenditure on borrowed funds is disallowable when the assessee also provides interest-free advances to a family member, and if there is sufficient own capital to cover such advances.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM DB BENCH VISAKHAPATNAM

Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.

Hearing: 13.08.2026Pronounced: 19.08.2026

PER MANJUNATHA G. A.M. :

This appeal by the Assessee is directed against the Order dated 31.10.2025 of the learned CIT(A), Visakhapatnam- 3, Visakhapatnam, for the assessment year 2018-2019. 2 ITA.No.748/Viz./2025

2.

Brief facts of the case are that the assessee is an individual and proprietor of M/s. SR Shipping Services, had filed his return of income for the assessment year 2018-2019 admitting total income of Rs.70,57,380/- besides agricultural income of Rs.60,000/-. Consequent to search and seizure action conducted in the group case of M/s. Andru Minerals, a survey operation u/sec.133A of the Income Tax Act [in short "the Act"], 1961 was conduc

The order continues below.

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