CHANCHAL BUILDCON,AHMEDABAD vs. ITO.WD-6(1)(1), AHMEDABAD, AHMEDABAD

ITA 1038/AHD/2026Status: DisposedITAT Ahmedabad24 September 2026AY 2018-198 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The tribunal upheld the disallowance of proportionate interest on funds diverted for partner withdrawals, citing violations of RERA guidelines and lack of business expediency. However, it remanded the matter to the AO to verify if similar disallowances were made in prior years for the opening debit balance.

What were the facts?

The assessee, a real estate developer, incurred interest expenses on unsecured loans used for land purchase. The AO disallowed a portion of this interest, linking it to significant partner capital withdrawals from member collections, which were allegedly not used for business purposes or loan repayment.

What were the issues?

Whether interest on borrowed funds is disallowable when funds are diverted to partners without business expediency, and how to treat opening debit balances in partner accounts for such disallowances.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 37

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri S. N. Divatia, AR & Shri Samir Vora, AR
For Respondent: Shri Amit Pratap Singh, SR-DR
Hearing: 15.07.2026Pronounced: 24.09.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 06.02.2026 for the Assessment Year (A.Y.) 2018-19 in the proceeding u/s. 143(3) of the Income Tax Act [hereinafter referred as “The Act”].

2.

The brief facts of the case are that the assessee had filed its return of income for A.Y 2018-19 on 30.10.2018 declaring total income of Rs.18,53,600/-. The case was selected for scrutiny under CASS. The assessee is engaged in the business of real estate development and Chanchal Buildcon Vs ITO, AY- 2018-19 2 constructio

The order continues below.

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