2023 (3) TMI 196 - AT - Income Tax

Interest expenses capitalised to WIP - Reducing the work in progress (WIP) on account of proportionate disallowance of interest expenses capitalised to WIP mainly incurred on account of secured loans - HELD THAT - Undisputedly assessee has taken loan of Rs.411.9 crore against which claimed interest expenses of Rs.59.91 crore but at the same time the assessee has also given loans and advances amounting to Rs.208.52 crores to various parties. AO allowed the interest at the rate of 14.5% on the basis of ledger of the assessee. When the assessee has failed to prove the nexus of interest free funds with advances made rather advanced the loan out of common pool and no other facts have been brought on record before the Tribunal we do not find any illegality or perversity in the impugned findings given by the CIT(A). The assessee despite availing numerous opportunities has failed to appear before the Tribunal to assist the Bench to unsettle the findings returned by the CIT(A). Income from house property - Treating the business centre income generated from providing business facilities as income taxable under the head income from house property - HELD THAT - There is nothing on record if the findings returned in the earlier years have been disturbed. The assessee has not come up before the Tribunal to explain as to how the said income is to be treated as business income. So we find no illegality or perversity in the impugned addition confirmed by the CIT(A). In view of what has been discussed above present appeal filed by the assessee is hereby dismissed.

Summary

Issues:
1. Delay in filing the appeal
2. Disallowance of interest expenses and treatment of business income

Issue 1: Delay in filing the appeal

The appeal filed by the appellant was deemed time-barred due to a delay of 43 days. The appellant cited misplacement of the order passed by the Ld. CIT(A) and the absence of the concerned accountant as reasons for the delay. The Tribunal, considering the affidavit filed by the director of the company, decided to condone the delay based on the principle of substantial justice prevailing over technical considerations. This decision was supported by a Supreme Court ruling emphasizing the preference for substantial justice over non-deliberate delays.

Issue 2: Disallowance of interest expenses and treatment of business income

The appellant sought to challenge the order confirming the reduction of work in progress (WIP) due to a proportionate disallowance of interest expenses incurred on secured loans. The Ld. CIT(A) upheld this decision, citing the absence of proof establishing a nexus between interest-free funds and advances made from a common fund. The Tribunal found no illegality in this ruling, especially since the appellant failed to provide additional evidence or appear before the Tribunal to contest the findings.

Regarding the treatment of business income generated from providing business facilities as taxable under "income from house property," the Ld. CIT(A) affirmed the AO's decision based on previous year orders. The appellant did not present any contradictory evidence or challenge the earlier findings. Consequently, the Tribunal upheld the Ld. CIT(A)'s decision, dismissing the appeal due to the lack of new information or arguments presented by the appellant.

In conclusion, the Tribunal dismissed the appeal due to the appellant's failure to substantiate their claims or challenge the lower authorities' decisions effectively. The judgment emphasized the importance of providing substantial evidence and legal arguments to support appeals effectively in tax matters.