DCIT(CC)-8(3), MUMBAI vs. LOKHANDWALA KATARIA CONSTRUCTION (PVT) LTD, MUMBAI

KANT, AM appeals by the Revenue for as 19 are directed against two s
Commissioner of Income-tax he Ld. CIT(A)’], whereas, the cros essee for assessment year 2018- n grounds have been raised in s, therefore, same were hear y of this consolidated order f e up the appeal of the Revenue ole ground raised by the Revenu the facts and in the circumstances of the CIT(A) erred in deleting the disallowance o ounting to Rs.8,85,77,454/- without app t out by the Assessing Officer that the of Interest claimed as expenditure shou
Interest free loans given to Lokhandwala he same is not incurred for the purpose of facts of the case are that the 31.10.2017 declaring loss at Rs e filed by the assessee was selec la Kataria Construction
(Pvt) Ltd
2
Nos. 3879 & 3878 & CO.
193/MUM/2024
ssessment years separate orders
(Appeals) – 50, ss-objection has -19. n these appeals d together and for the sake of for assessment ue is reproduced e case and in of Interest u/s preciating the proportionate uld be made to Infrastructure f business?
e assessee filed s.8,50,91,969/-.
cted for scrutiny assessment and stat
(in short ‘the Act’) assessment complet disallowances were m issue of proportiona
Rs.8,85,77,454/- all Revenue is in appe reproduced above.
5. Before us, the L containing pages 1 to 5.1 The sole groun
Rs.8,85,77,454/- ou progress (WIP) for the funds towards intere facts qua the issue in carrying out constru located in Mumba investment firm nam amounting to Rs.100
in 2006. As part of entered into between interalia, that approv company from ‘TC
M/s Lokhandwal
ITA N tutory notices under the Incom
) were issued and complied ed u/s 143(3) of the Act cer made. On further appeal, the Ld ate disallowance of the interes lowed relief to the assessee.
eal before us by way of raisi
Ld. counsel for the assessee file o 99. nd of the appeal relates to ut of interest paid and debit e reason that assessee diverted est free advances to sister con n dispute are that the assessee uction of residential tower na i. The assessee received fu mely M/s Tricona Capital (Fi
0 crores for construction of the a the funding arrangement, an assessee and TC5 which conta val was required to be taken b
C5’
for any major busin la Kataria Construction
(Pvt) Ltd
3
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193/MUM/2024
me-tax Act, 1961
d with. In the rtain additions/
d. CIT(A) on the t amounting to Aggrieved, the ing grounds as ed a Paper Book disallowance of ted to work in interest bearing ncern. The brief was engaged in amely ‘Minerva’
unding from a ive) Ltd. (TC5) aforesaid project agreement was ined conditions, by the assessee ness decisions.

Subsequently, the a Baroda for Rs.100 c
2014. Out of the said completing up to 51s getting Floor Space construction could assessee submitted could not make pay which resulted into performing assets (N
Baroda’ on 31.12.20
assessee. Under the India Bulls Housin construction of proje
Allahabad Bank. For from TC5 but same from the project. A between assessee an as shareholder from take loan and con shareholding of th
Lokhandwala Infras proceedings the AO
Rs.384.83 crores for M/s Lokhandwal
ITA N assessee had taken term loan rores and Allahabad Bank for d funds, the assessee carried o st floors in 2014, but there wa
Index (FSI) for balance floors not be continued from 2014
that in view of the financial c yment of installments for loan account of the assessee conv
NPA) by the ‘Allahabad Bank
15 and banks started legal act circumstances, the assessee a ng Finance Ltd. to avail fu ect and repay the loan of Bank r this purpose, the assessee s was denied and the said comp
After several discussion and nd TC5, the assessee agreed for the assessee company so that struct the pending building he
TC5
by another sister struction Pvt. Ltd. During t
O found that the assessee a r construction of its real esta la Kataria Construction
(Pvt) Ltd
4
Nos. 3879 & 3878 & CO.
193/MUM/2024
n from Bank of Rs.50 crores in out construction s some delay in and hence the 4 onwards. The crunch faced, it ns to the banks verted into non- k’ and ‘Bank of tion against the approached M/s urther loan for k of Baroda and sought approval pany sought exit communication r exit of the TC5
t assessee could and substitute concern
M/s the assessment availed loan of ate project from India Bull Housing F
Rs.107.5 crore has b concern i.e. Lokhand of the assessee from Assessing Officer has Housing Finance Lt crores to Lokhanwal loan. According to th funds for non-busi corresponding to the Ltd. was liable to be But according to the the business need an of the pending build
CIT(A), the delay in g cost of pending loan
The Ld. CIT(A) also r
Court in the case of S free loan were advan fund, then interest on 6. We have caref perused the materia case laws relied upon M/s Lokhandwal
ITA N

Finance Ltd. Out of total amoun been forwarded as interest free l dwala Infrastructure Pvt. Ltd fo m TC5 and thereby allowing the s disallowed the interest paymen d corresponding to the advan la Infrastructure Pvt. Ltd. as a he Assessing Officer, it was a iness purposes and therefore e advance to Lokhandwala Infr disallowed invoking section 36(
Ld. CIT(A) said advance was for nd survival of the company so th ding could be completed. Accor getting further funds was adding s as well as legal action agains relied on the decision of the H
SA Builders 288 ITR 1 to supp ced for commercial expediency n borrowed fund is allowable ex fully considered the rival su al available on record includin n by the assessee:
la Kataria Construction
(Pvt) Ltd
5
Nos. 3879 & 3878 & CO.
193/MUM/2024
nt, an amount of oan to its group r buying shares e exit TC5. The nt to India Bulls nce of Rs.107.5
an interest free diversion of the e, the interest rastructure Pvt.
1)(iii) of the Act.
r the purpose of hat construction rding to the Ld.
g to the interest st the company.
Hon’ble Supreme port that interest out of borrowed penditure.
ubmissions and ng the following

 Decisi
Builde
 Decisi
Cycles
 Decisi
Chemo
 Decisi
CIT v.
6.1 It is an undispu bearing loan of ₹384
Ltd. (hereinafter refe construction and ou crores has been tr
Lokhandwala Infrastr states that the am borrowed’ for the pu allowed as a deducti the Act. The Hon’ble
(supra) held that th includes expenditu expediency’ and it i thereby. Thus, the c before us is wheth advanced by the ass
Lokhandwala Infras
‘commercial expedien
M/s Lokhandwal
ITA N on of Hon'ble Supreme Court in the c er Ltd. v. CIT [(288 ITR 1]
on of Hon'ble Supreme Court in the c s Pvt. Ltd. v. CIT [379 ITR 347]
on of Hon'ble Mumbai Tribunal in t osyn Ltd. N. ACIT [139 ITD 68]
on of Hon'ble Bombay High Court in Chemosyn Ltd. [371 ITR 427]
uted fact that the assessee obtai
4.83 crores from India Bulls H ferred to as ‘India Bulls’) for ut of that interest free advanc ransferred to related concern ructure Pvt. Ltd. The section 36
mount of interest paid in resp urposes of business or profes ion for computing income unde e Supreme Court in the case he expression- for the purpo ure incurred voluntarily fo is immaterial if a third party core issue for adjudication in t her the interest-free loan of sessee—out of interest-bearing structure Pvt. Ltd. qualifies ncy.’
la Kataria Construction
(Pvt) Ltd
6
Nos. 3879 & 3878 & CO.
193/MUM/2024
case of S.A.
case of Hero the case of the case of ined an interest-
Housing Finance the purpose of ce of Rs. 107.5
n namely M/s
6(1)(iii) of the Act pect of ‘capital ssion has to be er section 28 of of SA Builders ose of business or ‘commercial y also benefited he present case
₹107.5 crores borrowings—to as an act of 6.2 Upon examinin
Infrastructure Pvt. L considered view, ha genuinely interested have directly availed
India Bulls. There assessee to route fun this manner. Howeve directly availed the l been allowable as th
The contention of th substituting TC5 by shareholder was bein documentary evidenc in the hands of Lokh of raising interest be circumstances of the shareholding of TC5
was a mechanism d deduction on the ₹1
have been permissib
Pvt. Ltd. Furthermor disallowed the intere
M/s Lokhandwal
ITA N ng the facts, we note that Ltd. is a related entity of the a d Lokhandwala Infrastructure in acquiring a stake in the as an interest-bearing loan of ₹10
appears to be no justifiable nds to Lokhandwala Infrastruct er, if Lokhandwala Infrastructu loan, the interest expenditure he funds were utilized for cap he assessee of extending intere y Lokhandwala Infrastructure ng a business need, is at all not ce has been filed indicating of in handwala Infrastructure Pvt. Ltd earing funds from banks or ma e case, it is evident that the sub through Lokhandwala Infrastru devised by the assessee to cla
107.5 crores loan, which other le in the hands of Lokhandwala re, we note that the Assessing est corresponding to the borrow la Kataria Construction
(Pvt) Ltd
7
Nos. 3879 & 3878 & CO.
193/MUM/2024
t Lokhandwala assessee. In our
Pvt. Ltd. been ssessee, it could
07.5 crores from reason for the ture Pvt. Ltd. in re Pvt. Ltd. had would not have ital investment.
est free loan for Pvt. Ltd as a t convincing. No nsufficient funds d or its inability arket. From the bstituting of the ucture Pvt. Ltd.
aim an interest rwise would not a Infrastructure
Officer has not wings utilized by the assessee for its c the purpose of busine
6.3 In our consider loan to Lokhandwal justification. The loa purpose of construct related concern. Mor to show that any shareholding of TC5 b than transferring the by way of providin incurring an interes rationale for not char concern. The loan fr share holder also de shareholder compan under section 2(22)(e assessee are distin
Builders(supra), the of commercial exped expediency has been (supra), loan was g additional margin to M/s Lokhandwal
ITA N construction business being sa ess.
red opinion, the extension of la Infrastructure Pvt. Ltd. lac an has been taken from India tion activity and not for the pu reover, the assessee has not file y attempt were made for s by way of an open offer to publi e said shareholding to a related g interest free loan. When t st liability towards India Bull rging interest on the loan exten rom a private limited liability eemed to be a dividend in th ny subject to the other cond e) of the Act. The cases laws rel nguishable on facts. In the loan was granted to sister conc diency but in the case no su n established. In the case of He granted to subsidiary company o meet working capital for me la Kataria Construction
(Pvt) Ltd
8
Nos. 3879 & 3878 & CO.
193/MUM/2024
ame incurred for an interest-free cks commercial a Bulls for the rpose of loan to ed any evidence substitution of c at large rather d entity that too the assessee is ls, there is no nded to a related company to its he hands of the ditions provided lied upon by the e case of SA cern as measure uch commercial ero Cycles P Ltd y for providing eeting any cash loses. Accordingly, aside the order of th ground of appeal of th
7. Now, we take u year 2018-19. The re
Whether on th law, the Ld.
u/s 36(1)(üi) the facts b proportionate should be m
Lokhandwala for the purpos
8. The ground rai assessment year 201
mutandis.
9. The cross-objec under :
1. The Ld. CI action of Ld.
13,77,35,740
hands of the a 2. The Ld. CI addition mad invalid and ba
M/s Lokhandwal
ITA N we reject the assessee’s cont he Learned CIT(A) on the issue he Revenue is accordingly allow up the appeal of the Revenue levant ground is reproduced as he facts and in the circumstances of the CIT(A) erred in deleting he disallowanc amounting to Rs. 6,53,00,710/- without rought out by the Assessing Office disallowance of Interest claimed as made to the extent of Interest free loa a Infrastructure Put. Ltd. as the same is se of business?
ised being identical to the gro
17-18 and therefore, same is d ction raised by the assessee are IT(A) has erred in law and in facts in co
AO in reducing the proportionate expen
0/- u/s 40(a) (ia) of the Act from closing appellant which is invalid and bad in the IT(A) has erred in law and in facts in co de u/s 43CA of the Act of Rs. 23,55,014
ad in the eyes of law.
la Kataria Construction
(Pvt) Ltd
9
Nos. 3879 & 3878 & CO.
193/MUM/2024
tention and set in dispute. The wed.
for assessment under:
case and in ce of Interest appreciating er that the expenditure ans given to not incurred ounds raised in decided mutatis e reproduced as onfirming the nditure of Rs.
g WIP in the e eyes of law.
onfirming the 4/- which is 10. The ground No behalf of the asse infructuous.
11. As far as groun assessee submitted amounting to Rs.23, and therefore, said a the stamp duty valu real estate property s business income of t assessee referred to Tribunal in the case
Company v. ACIT in wherein the section nature and accordin case of the assesse reproduced as under “8. Considere placed on rec between sta difference of appeal raised referring to Fi section with assessed by consideration be full ITA.N
Housing and M/s Lokhandwal
ITA N

. 1 of the cross-objection was ssee and therefore, same is nd No. 2 is concerned, the Ld.
that addition made u/s 43
55,014/- is within the toleranc addition is not justified. The diff e and sale consideration of sto sold by an assessee is liable to the assessee. Before us, the Ld.
the decision of the Co-ordinat e of Wadhawana Housing and n ITA No. 3148/Mum/2022 dat
43CA has been held to be ngly tolerance limit of 10% wou ee. The relevant finding of t
:
ed the submissions made by the Ld. DR a cord, we observe from the record that th mp duty value and agreement valu
4.88% only. We further observe from the d by the assessee that assessee has m inance Act, 2018, which has made an am effect from 01.04.2019, the value stamp duty authority does not exceed n received as a result of transfer then it i
NO. 3148/MUM/2022 (A.Y: 2018-19)
Infrastructure Company value of consi la Kataria Construction
(Pvt) Ltd
10
Nos. 3879 & 3878 & CO.
193/MUM/2024
not pressed on s dismissed as counsel for the CA of the Act e limit of ± 10%
fference between ck –in –trade of be assessed as counsel for the te Bench of the d Infrastructure ted 20.04.2023, retrospective in uld apply in the the Tribunal is and material he difference ue having a e grounds of made a plea mendment in adopted or 105% of the is deemed to Wadhwana ideration. As per the groun the amendme
On similar pr
Shri Harish H adjudicated retrospective to section 51
below: -
"3.3. ..
the Fin which applica differen sale co sale c additio that th operati in the 123 tax made i proviso variatio valuati section therefo langua materia though of Sect provisi is ava respec
Tribun added toleran to Sect made i the ld.
Rs.4,42
the gro
9. Respectfull decision the C
M/s Lokhandwal
ITA N nd raised, we observe that assessee has ent made to section 43CA are retrospecti roposition, the Coordinate Bench in the H Gandhi v. ACIT [(2022) (6) TMI 1277 - IT that the amendment made to sectio in nature in consonance with the amend
C of the Act, for the sake of clarity it is ....... But we find that there is a proviso in nance Act 2018 w.e.f. A.Y.2019-20 on was later amended by the Finance able from A.Y.2021-22, which states nce between the stamp duty value and onsideration is not more than 10% then, consideration shall have to be accep on in terms of 43CA is required to be ma his amendment has been held to be ret ion by the Co-ordinate Bench decision of case of Maria Fernandez Cheryl vs. ITO xmann.com 252 wherein it was held that in scheme to Section 50C(1) of the Act by o thereto and by enhancing toleranc ons between sale consideration vis a vis ion from 5% to 10% are effective from da n 50C itself was introduced i.e. from 01/0
ore, having retrospective applicability t age of provisions of Section 50C are a with provisions of Section 43CA of the h the aforesaid decision was rendered in tion 50C of the Act, the same analogy wo ions of Section 43CA of the Act also as sim ailable in Section 43CA of the Act a tively following the aforesaid decisi al, we hold that the difference of R by the ld. AO in the assessment fall nce band of 10% and hence, by applying tion 43CA of the Act, no addition is re in the instant case u/s.43CA of the Act.
. AO is hereby directed to delete the 2,460/- made by him in the assessment.
ounds raised by the assessee are allowed ly following the above said decision, and Coordinate Bench adjudicate that amen la Kataria Construction
(Pvt) Ltd
11
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claimed that ve in nature.
case of the TAT Mumbai]
on 43CA is dments made s reproduced ntroduced by nwards and e Act 2020
that if the the reported the reported ted and no ade. We find rospective in this Tribunal
O reported in t amendment inserting the ce band for s stamp duty ate on which 04/2003 and thereon. The exactly pari e Act. Hence, n the context uld apply for milar proviso also. Hence, ion of this Rs.4,42,460/- ls below the g the proviso equired to be Accordingly, addition of Accordingly, d."
in the above dment made to section 43C proviso the p section 43CA difference is section consid the above dis by the assess
10.1 Respectfully, fol we restore the issue i the claim of the ass with law. The ground
11. The Ld. counse in the cross-objection
1. On the fact to appreciate
Rs. 6,53,00,7
consumed in t
2. On the fact to appreciate and set off o earlier years appellant.
3. On the fact to appreciate
12,87,281/- w
12. We have heard r the additional ground not requiring investi were admitted in view the case of NTPC L
M/s Lokhandwal
ITA N

CA is retrospective in nature. Accordingly percentage up to 5% are outside the p
A of the Act. We observe that, the stamp
4.88% and the same outside the provis dering the fact the difference is less tha scussion, we are inclined to allow the gr see.”
llowing the Co-ordinate Bench o in dispute to the file of the AO fo essee for verification and allow d is accordingly allowed for statis l for the assessee also filed add n, which are reproduced as unde ts and circumstances of the case, the Ld.
that the quantum of interest u/s 36(1)(iii)
710/-disallowed and reduced from the cos the assessment order is incorrect and bad ts and circumstances of the case, the Ld.
that the Ld. AO ought to have allowed ca of unabsorbed depreciation of Rs. 2,19
s against assessed income in the ha ts and circumstances of the case, the Ld.
that the Ld. AO has granted short credit o which is invalid and bad in the eyes of rival submission on the issue of d. The grounds raised being lega igation of the fresh facts and w of the decision of Hon’ble Su
Ltd. 229 ITR 283 (SC). The g la Kataria Construction
(Pvt) Ltd
12
Nos. 3879 & 3878 & CO.
193/MUM/2024
y, as per the provisions of p duty value sions of this an 5%. From round raised of the Tribunal, , for verification of w in accordance stical purpose. .
ditional grounds er:
CIT(A) failed
) of the Act of st of material d in law.
CIT(A) failed arry forward
9,59,912/- of ands of the CIT(A) failed of TDS of Rs.
law.
f admissibility of al in nature and therefore, same upreme Court in ground No. 1 is related to the ground have already allowed additional ground of additional ground No forward and set
Rs.2,19,59,912/- of assessee has agitated these issue are subje
Assessing Officer and file of the Assessing with law. The additio for statistical purpose
13. In the result, b whereas cross-objec statistical purposes.
Order pronoun (KAVITHA RA
JUDICIAL M
Mumbai;
Dated: 18/03/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
M/s Lokhandwal
ITA N d raised in the appeal of the Rev d in favour o the Revenue and the assessee is dismissed as in o. 2 relates to verification and al off of the unabsorbed d earlier years against. In grou d short for credit TDS of Rs.12
ect matter of the verification at d therefore, we restore these tw
Officer for verification and allow onal ground No. 2 & 3 are acco e.
both the appeals of the Reven tions of the assessee are par ced in the open Court on 18/0 AJAGOPAL)
(OM PRAK
MEMBER
ACCOUNTA ded to :

la Kataria Construction
(Pvt) Ltd
13
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193/MUM/2024
venue, which we d therefore, this nfructuous. The lowing the carry depreciation of und No. 3, the ,87,281/-. Both t the end of the wo issues to the w in accordance ordingly allowed nue are allowed rtly allowed for 03/2025. d/-
KASH KANT)
ANT MEMBER

////

M/s Lokhandwal
ITA N

BY ORDER

(Assistant Re

ITAT, Mu la Kataria Construction
(Pvt) Ltd
14
Nos. 3879 & 3878 & CO.
193/MUM/2024
R, gistrar) umbai