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Facts
The assessee, Shree Hatkeshwara Translines, had capitalized interest paid on loans for acquiring commercial vehicles and claimed depreciation thereon. Later, during assessment proceedings for A.Y. 2018-19, it contended that the interest should be treated as an expenditure rather than capitalized. The Assessing Officer (AO) disallowed depreciation and other additions, and the CIT(A) denied relief on this issue, as well as the claim for interest paid to Non-Banking Financial Companies (NBFC) because the assessee had not revised its return.
Held
The Tribunal noted that the assessee failed to furnish proper details to the AO or the Tribunal explaining why the interest was initially capitalized and why it should now be allowed as an expenditure. Considering the interest of justice, the Tribunal remitted the matter back to the Jurisdictional Assessing Officer for a fresh adjudication, directing to provide a reasonable opportunity of hearing to the assessee.
Key Issues
Whether the assessee is entitled to claim interest paid on loans for acquiring commercial vehicles as an expenditure instead of capitalizing it, and whether such a claim can be allowed without filing a revised return of income.
Sections Cited
u/s.250, u/s.143(3), u/s.144B, u/s.143(2), u/s.142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “B”, PUNE
Before: DR.MANISH BORAD & SHRI VINAY BHAMORE
आदेश / ORDER
PER DR. MANISH BOARD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of assessee pertaining to A.Y. 2018-19 is directed against the order dated 22.08.2024 framed by ACIT-5, Pune u/s.250 of the Income Tax Act, 1961 (in short ‘the Act’) arising out of Assessment Order dated 20.04.2021 passed u/s.143(3) r.w.s.144B of the Act.
Assessee has raised following grounds of appeal :
“1. Honourable CIT, Pune is not justified by making an addition of amount of depreciation claimed on interest on loans capitalized in the value of commercial vehicles. 2. Honourable CIT, Pune is not justified in ignoring the claim made during the assessment proceedings for claiming expense of interest on loan, which was capitalized in the value of commercial vehicles.
Honourable CIT, Pune erred in rejecting the revised computation filed by us : Amount (₹) Sr.No. Particulars 1 Profits and Gains from Business and (5,87,04,369) Profession after all the adjustments 2 Add : Depreciation on component of 17,35,772 Interest Capitalized (As per IT Act, 1961) Accepted by Ld. CIT 3 Less : Interest expense actually incurred (32,87,776) Not accepted based on decision of Hon Supreme Court in Goetze (I) Ltd. Vs. CIT 4 Gross Total Income (6,02,56,373)
4. Assessee craves the right to present any other/additional Ground of Appeal and/or supporting Case Law(s) in support of his claim, during hearing (s) of the appeal matter.”
3. At the outset, ld. Counsel for the assessee submitted that the assessee has capitalised the interest paid for acquiring the Fixed Assets and has claimed depreciation thereon. However, the assessee is entitled to claim interest paid for the year as an expenditure rather than capitalizing such interest. He however fairly admitted that necessary details could not be filed before the ld. Jurisdictional Assessing Officer in support of the said claim and therefore prayed for providing one more opportunity to furnish these details.
On the other hand, ld. Departmental Representative submitted that the claim of the assessee of capitalizing the interest is part of the Audited Financial Statements and no revised return of income has been furnished by it for making alleged claim and in absence thereof such claim is not allowable.
We have heard the rival contentions and perused the record placed before us. We observe that the assessee is a Private Limited Company and loss of ₹5,85,90,659/- declared in the return of income for A.Y. 2018-19 furnished on 30.10.2018. After the case being selected for Compulsory Scrutiny valid notices u/s.143(2) and 142(1) of the Act duly served upon the assessee. Ld. Assessing Officer during the course of assessment proceedings observed that the assessee has capitalized the total interest incurred on purchase of commercial vehicles. In absence of any proper response from the assessee to explain the transaction, ld. AO completed the assessment disallowing depreciation of ₹17,81,764 and along with other addition of ₹19,26,438 assessed the total loss at ₹5,48,82,457. Assessee filed appeal before ld.CIT(A) and partly succeeded and so far as the issue under consideration is concerned, assessee failed to get any relief and also the assessee’s claim on interest paid to Non Banking Financial Companies (NBFC) at ₹32,87,776 was also denied as the assessee has not revised the return.
Before us, ld. Counsel for the assessee has made reference to the written submissions filed before ld.CIT(A) claiming that a mistake committed by the assessee in the past of capitalizing the interest paid on the loans taken for acquiring assets which have been put to use during the year was incorrect and the assessee is entitled to interest expenditure incurred during the year. We however find that assessee has failed to furnish the relevant details before the Assessing Officer and even before us also assessee could not place the facts properly as to why the interest has been capitalized during the year and now why the claim of interest paid to NBFC is allowable to the assessee.
We therefore in the interest of justice deem it appropriate to remit back the issues raised in the instant appeal to the file of ld. Jurisdictional Assessing Officer for afresh adjudication of the issues and deciding them in accordance with law. Needless to mention that ld.JAO shall afford reasonable opportunity of hearing to the assessee. Assessee is directed to update latest email id and contact detail on ITBA portal. Assessee is also directed to remain vigilant and not to take adjournment unless otherwise required for reasonable cause. Impugned order is set aside and effective grounds of appeal raised by the assessee are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on this 06th day of January, 2026.