DY. CIT CENTRAL CIRCLE 3 4, MUMBAI, MUMBAI vs. SAMAGRA WEALTHMAX PRIVATE LIMITED, MUMBAI

Per: SHRI JAGADISH, A.M.: 1. This appeal is filed by the Revenue against the order dated 25.08.2025 passed by the Ld. Commissioner of Income Tax (Appeals), [hereinafter referred to as "Ld. CIT(A)"] for A.Y. 2022-23 arising out of the assessment proceedings framed u/s 143(3) of the Income Tax Act, 1961. 2. This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-51, Mumbai [hereinafter referred to as "Ld. CIT(A)"] dated 25.08.2025 for the assessment year 2022-23.

ITA No.6590/M/2025 Samagra Wealthmax Private Limited 3. The Revenue has raised various grounds challenging the action of the Ld. CIT(A) in deleting the disallowance of Rs.3,28,68,600/- made by the Assessing Officer on account of premium paid on redemption of Non-Convertible Debentures. 4. Briefly stated, the facts are that the assessee is a company engaged in the business of real estate, builders and developers, leasing and rental activities. The return of income was filed declaring loss of Rs.1,13,38,865/-. The case was selected for scrutiny and assessment was completed under section 143(3) of the Act. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had claimed deduction of Rs.3,28,68,600/- towards premium paid on redemption of Non-Convertible Debentures (NCDs). The Assessing Officer called upon the assessee to furnish complete details regarding the Debenture Term Sheet, computation of redemption premium, utilization of funds raised through NCDs, complete documents filed with ROC and other supporting evidences. 5. The assessee submitted that the NCDs were issued to Sunteck Realty Ltd. for raising business funds and the premium paid on redemption represented the cost of borrowed funds and was allowable as revenue expenditure. The Assessing Officer was, however, not satisfied with the explanation. According to him, the assessee failed to furnish the Debenture Term Sheet, complete documents relating to the issue of debentures, basis of computation of redemption premium and evidence regarding utilization of borrowed funds. The Assessing Officer further observed that the assessee had failed to establish that the borrowed funds were not utilized for acquisition of capital assets. He, therefore, treated the claim of premium on redemption of debentures as inadmissible under section 37(1) and made disallowance of Rs.3,28,68,600/-.

ITA No.6590/M/2025 Samagra Wealthmax Private Limited 6. Aggrieved, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee furnished detailed submissions along with the Debenture Term Sheet and explained that 1,62,638 Non- Convertible Debentures of face value of Rs.1,000/- each carrying coupon rate of 0.1% were issued to Sunteck Realty Ltd. on 27.03.2019 for a period of three years. It was submitted that as per the terms of issue, the debentures were secured against Pride Properties and redemption was linked with realization from sale of the said properties. The assessee contended that the premium represented consideration for use of borrowed funds and was allowable as revenue expenditure. Reliance was placed on the decisions of the Hon'ble Bombay High Court in CIT vs. Raymond Ltd., the Hon'ble Supreme Court in Madras Industrial Investment Corporation Ltd. vs. CIT and the Hon'ble Karnataka High Court in Nitesh Housing Developers (P.) Ltd. 7. The Ld. CIT(A), after considering the submissions and the Debenture Term Sheet produced before him, observed that the terms of issue specifically provided the mechanism for redemption and computation of redemption premium. He further observed that there was no material on record to establish that the borrowed funds had been utilized for acquisition of capital assets and that the audited financial statements did not reflect any such capital asset. Relying upon the decision of the Hon'ble Bombay High Court in CIT vs. Raymond Ltd. and the decision of the Hon'ble Supreme Court in Madras Industrial Investment Corporation Ltd., the Ld. CIT(A) held that the premium paid on redemption of debentures represented the cost of borrowed funds and was allowable as revenue expenditure under section 37(1). Accordingly, he deleted the addition of Rs.3,28,68,600/-. 8. During the course of hearing before us, the Ld. Departmental Representative strongly relied upon the assessment order. He submitted

ITA No.6590/M/2025 Samagra Wealthmax Private Limited that the Assessing Officer had repeatedly called upon the assessee to furnish the Debenture Term Sheet, complete details regarding computation of premium, utilization of borrowed funds and supporting documents. However, the assessee failed to furnish the same during the assessment proceedings. It was argued that the Ld. CIT(A) has granted relief after considering the Debenture Term Sheet and other documents which admittedly were not before the Assessing Officer. Such evidences have been accepted without complying with the provisions of Rule 46A of the Income Tax Rules and without granting any opportunity to the Assessing Officer to examine or rebut the same. The Ld. DR further submitted that the allowability of redemption premium depends upon the purpose for which the borrowings were utilized. It is not known from the record whether the property against which the debentures were issued constituted stock-in-trade or capital asset. Unless this fundamental factual aspect is verified, the expenditure cannot automatically be treated as revenue expenditure. He, therefore, prayed that the order of the Ld. CIT(A) be set aside and the matter restored to the Assessing Officer. 9. Per contra, the Ld. Authorised Representative supported the order of the Ld. CIT(A). He submitted that the premium paid on redemption of debentures is nothing but the cost incurred for utilization of borrowed funds and the issue is squarely covered by the judgment of the Hon'ble Bombay High Court in CIT vs. Raymond Ltd. and the decision of the Hon'ble Supreme Court in Madras Industrial Investment Corporation Ltd. It was submitted that the Ld. CIT(A), after examining the terms of the debenture issue and the judicial precedents, has rightly deleted the addition and therefore no interference is called for. 10. We have heard the rival submissions and perused the material available on record. We find that the Assessing Officer disallowed the

ITA No.6590/M/2025 Samagra Wealthmax Private Limited claim primarily because the assessee failed to furnish the Debenture Term Sheet, complete supporting documents, details regarding computation of redemption premium and evidence regarding utilization of borrowed funds. The Assessing Officer also specifically doubted whether the borrowed funds had been utilized for acquisition of capital assets. 11. On the other hand, the Ld. CIT(A) deleted the addition after examining the Debenture Term Sheet and recording findings based upon the terms contained therein. The Ld. CIT(A) has observed that the debentures were secured against Pride Properties, that the redemption mechanism was linked to realization from sale of the said properties and that no capital asset corresponding to the borrowed funds was reflected in the audited financial statements. These findings are based upon documents which admittedly were not examined by the Assessing Officer. 12. In our considered opinion, the grievance of the Revenue deserves acceptance. The very foundation on which relief has been granted by the Ld. CIT(A) is the Debenture Term Sheet and the accompanying documents. These documents were admittedly not available before the Assessing Officer. There is nothing on record to show that these additional evidences were forwarded to the Assessing Officer for examination or that any remand report was called for before granting relief. Once the appellate authority places reliance upon additional documentary evidence which has direct bearing on the allowability of the claim, the Assessing Officer is required to be afforded an effective opportunity to verify the correctness of such material. 13. We also find merit in the contention of the Ld. DR that the allowability of redemption premium cannot be decided merely by applying the ratio of Raymond Ltd. without first verifying the factual 5

ITA No.6590/M/2025 Samagra Wealthmax Private Limited foundation of the case. Whether the borrowings were utilized in the ordinary course of business, whether the property against which the debentures were secured constituted stock-in-trade or capital asset and whether the redemption premium is directly relatable to business borrowings are factual aspects which require proper verification by the Assessing Officer. The impugned order proceeds on the assumption that the property formed part of the business assets without there being any verification by the Assessing Officer. 14. Considering the totality of facts and circumstances, we are of the view that the interest of justice would be met by restoring the issue to the file of the Assessing Officer. The Assessing Officer shall examine the Debenture Term Sheet and all supporting documents relied upon before the Ld. CIT(A), verify the purpose for which the borrowings were utilized, determine whether the underlying property constituted stock- in-trade or capital asset and thereafter adjudicate the allowability of premium paid on redemption of Non-Convertible Debentures in accordance with law after providing adequate opportunity of hearing to the assessee. We clarify that we have not expressed any opinion on the merits of the claim and all contentions of both the parties are kept open.

Order pronounced in the open court on 29/06/2026.

Sd/- Sd/- (BEENA PILLAI) (JAGADISH) Judicial Member Accountant Member

Mumbai, Dated: 29/06/2026 Ashwani Rao Sr. Private Secretary

ITA No.6590/M/2025 Samagra Wealthmax Private Limited

Copy of the order forwarded to: 1. Appellant 2. Respondent 3. The CIT 4. The CIT (Appeals) 5. The DR, I.T.A.T. By order

(Assistant Registrar) ITAT, Mumbai