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TMI Blog2015 (10) TMI 1880X X X X Extracts X X X X X X X X Extracts X X X X ..... asset by the assessee and to be added to the cost of the land and interest incurred after the purchase of the land to be considered as revenue expenditure. On the other hand, if the land is treated as stock-in-trade, the entire interest on the loan used to purchase the land to be treated as revenue expenditure if the loan is genuine. With this observation, we direct the AO to reconsider the issue. - Decided partly in favour of assessee. Disallowance of sub-contract expenses u/s.40(a)(ia) - AO noticed that the assessee has neither deducted any TDS as per the provisions of sections 194A and 194C of the Act, nor remitted to the Govt. of India as on 31.03~2008 - Held that:- Similar issue was considered in the case of Shri N. Palanivelu v. IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, observed that out of the total unsecured loans of ₹ 36,00,235/-, an amount of ₹ 8,00,000/- was considered as non-genuine loan and disallowed (brought to tax) in the assessment of A.Y.2006-07, along with the interest claimed to have been paid on the said loan. During the current financial year also the assessee claimed interest payment on the said loan of ₹ 8,00,000/-. Hence the Assessing Officer disallowed interest claim (of ₹ 96,000/- calculated @ 12%) on the said non-genuine unsecured loan of ₹ 8,00,000/- and included in the total loans of ₹ 36,00,235/. The Assessing Officer, in his order also observed that an amount of ₹ 11,33,188/- was utilized for purchase of land which was directly taken to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the material on record. It is already observed that the loan is not genuine in earlier assessment years. When the principal loan itself is not genuine, there is no question of allowing of any interest on such non-genuine loan. Being so, disallowance of interest on on-genuine loan is justified. Regarding the disallowance of interest on the unsecured land utilized for the purchase of land, in our opinion, the interest incurred upto the date of sale deed registration of the land to be considered as capital expenditure, if it is treated as capital asset by the assessee and to be added to the cost of the land and interest incurred after the purchase of the land to be considered as revenue expenditure. On the other hand, if the land is treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our opinion, similar issue was considered by this Tribunal in the case of Shri N. Palanivelu v. ITO (40 ITR (Tri) 325), wherein it was held as under : 3. We have heard both the sides and perused the material on record. We find that the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports vs. ACIT (2012) 136 ITD 23 (Visakhapatnam) and judgment of Gujarat High Court in the case of CIT vs. M/s. Vector Shipping Services (P) Ltd in ITA No.122 of 2013 dated 09.7.2013 held that sec 40(a)(ia) is not applicable when there is no outstanding balance at the end of the close of the year relevant to the assessment yea in respect of these payment. However, the assessee has not brought on record, the details of outstanding e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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