2020 (8) TMI 755 - AT - Income Tax

Disallowance of interest - loan was used for the purpose of horse-trading and horse racing business - HELD THAT - Claim of the assessee was declined on the basis of this fact that the assessee did not earn any income from horse trading activity. It is not a sufficient reason to reject the claim of the assessee. It is not an always necessary to earn the profit from the said business or any other business. The assessee took loan for the said business so the interest disallowance is not justifiable. It is not in dispute that the loan was taken for horse trading activity on which the interest was claimed. Anyhow, the finding of the CIT(A) rejecting the claim of the assessee on the basis of non-receipt of profit is not liable to be sustainable, therefore, we set aside the finding of the CIT(A) and allowed the claim of the assessee.

Summary

Issues:
Disallowance of interest deduction of ?6,36,555 for A.Y. 2013-14.

Analysis:
The assessee appealed against the disallowance of interest deduction by the Commissioner of Income Tax (Appeals) for the A.Y. 2013-14. The assessee claimed that the interest was paid on a loan taken for horse-trading and horse racing business. The Assessing Officer (AO) disallowed the claim, stating that the assessee did not earn any income from the horse trading activity. However, the Tribunal found that earning a profit from the business is not a prerequisite for claiming the deduction. The Tribunal noted that the loan was indeed taken for the specified business purposes, justifying the interest deduction. The Tribunal set aside the CIT(A)'s decision and allowed the claim of the assessee.

The delay in pronouncement of the order was also addressed by the Tribunal due to exceptional circumstances caused by the COVID-19 pandemic and subsequent lockdown. The Tribunal explained the circumstances leading to the delay and cited relevant legal provisions and court orders regarding the extension of time limits for pronouncement of orders during the lockdown period. The Tribunal excluded the lockdown period while computing the time limit for pronouncement and proceeded with delivering the judgment. The Tribunal emphasized the pragmatic approach in interpreting the law during unprecedented situations, ensuring that the lockdown period was not considered as an ordinary time for the purpose of time limits set out in the Appellate Tribunal Rules, 1963.

In conclusion, the Tribunal allowed the appeal filed by the assessee, overturning the disallowance of the interest deduction and pronouncing the order on 24/08/2020.