TOM GEORGE,PALAKKAD vs. THE INCOME TAX OFFICER, WARD-1 & TPS, PALAKKAD

ITA 492/COCH/2025Status: DisposedITAT Cochin30 October 2025AY 2018-19Bench: SHRI INTURI RAMA RAO (Accountant Member), SHRI SOUNDARARAJAN K. (Judicial Member)1 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the interest paid on the loan amount for capital contribution to the firm should be eligible for set-off against the interest income earned from the firm. It also directed the AO to adopt the actual interest rate of 18% instead of the restricted 12%.

What were the facts?

The assessee, a partner in a firm, borrowed Rs. 2,59,51,640 from a finance company. A portion of this loan was transferred to the firm as capital contribution, while the rest was paid to sellers for property purchases. The assessee claimed deduction for the interest paid on the loan.

What were the issues?

Whether interest paid on borrowed funds for investment in a firm's capital contribution is deductible, and whether the interest rate should be restricted to 12% or taken at the actual rate of 18%.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 28(v),Section 40(b)(iv),Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN

Before: SHRI INTURI RAMA RAO & SHRI SOUNDARARAJAN K.

For Respondent: Smt. Leena Lal, Snr AR

PER SOUNDARARAJAN K., JUDICIAL MEMBER

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 15/05/2025 in respect of the A.Y. 2018-19 and raised the following grounds: 2. The brief facts of the case are that the assessee is a partner in the firm of M/s. Kizhakkeparambil Natural Rock Constructions LLP and filed his return of income on 06/09/2019. Subsequently, the case was selected for limited scrutiny under CASS and notices u/s. 143(2) and 142(1) were issued. The assessee had received a remuneration of Rs. 39,99,577/- from the firm and the interest of Rs. 42,37,308/- from the firm but not reported the

The order continues below.

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