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2019 (1) TMI 207 - ITAT AHMEDABADPenalty u/s 271(1)(c) - as per AO interest paid on the unsecured loan should be capitalized and the same cannot be allowed as deduction u/s 36(1)(iii) - whether the assessee has furnished inaccurate particulars of income by claiming a deduction on account of interest expenses on the loan which was utilized for investing in the properties? - Held that:- It is a settled law that the interest on loan used for investment purposes should be capitalized. Thus, interest expenses claimed in the Profit and Loss Account was added to the value of the investment. Accordingly, the value of the investment was enhanced. If investments are subject to depreciation, then the assessee will be entitled to claim the deduction of the interest in the form of depreciation u/s 32 of the Act. If the investments are not subject to depreciation, then the assessee will be entitled to deduction of interest expenses at the time of sale of such investment in the market. Therefore, in either case, the assessee was eligible for the deduction of the expenses in the different form. It could not be concluded that the assessee deliberately claimed the interest as revenue expenditure. The assessee has filed its return of income declaring loss of ₹ 8,52,704/-. Therefore if the assessee treats the interest expenses as capital in nature then also there was also no tax liability on the part of the assessee. Therefore, we are of the view there was no deliberate act on the part of the assessee to escape from the tax liability by claiming interest expenses as revenue. The claim made by the assessee in the return of income on account of interest expenses can be an inaccurate claim which cannot be equated with the inaccurate particulars of income - No penalty to be imposed u/s 271(1)(c) - decided in favour of assessee.
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