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2022 (11) TMI 714 - AT - Income TaxRevision u/s 263 - disallowance u/s 40(a)(ia) in respect of loan processing fee paid by the assessee AND disallowance of interest on account of charging of interest at lower rate on the loan given to a related party - HELD THAT:- A careful perusal of the definition of the term interest given in sec. 2(28A) would show that it uses the expression “service fee or other charge”. Hence it is possible to contend that the loan processing fee would fall under the category of “service fee or other charge”. A careful perusal of the definition would show that the the said payments (service fee or other charge) should also be ‘in respect of moneys borrowed or debt incurred’. Hence, any type of payment made after the borrowing of money or incurring of debt alone would be covered by the definition of sec.2(28A) of the Act. Hence, we are of the view that there is merit in the contentions of the Ld A.R that the loan processing fee cannot qualify as “interest” within the meaning of sec.2(28A) of the Act. We are of the view that the interpretation given by Ld PCIT in respect of this issue is not sustainable and hence the Ld PCIT was not justified in initiating revision proceedings in respect of this issue. Addition u/s 40A(2)(a) - We notice that the Ld PCIT initiated enquiry on the ground that the provisions of sec.40A(2)(a) are attracted to the transaction of loan given to the related party. However, he concluded that the provisions of sec.40A(2)(a) are not attracted. However, he concluded that a part of interest paid to GRUH Finance Ltd should be disallowed. We are unable to understand as to how a part of interest expenditure paid to GRUH Finance Ltd could be disallowed merely on the reasoning that the assessee has charged lower interest on the loan given to a related party - PCIT has also not cited any of the provisions of the Act, which would warrant such a disallowance. Hence, we do not find any rationale in the view taken by PCIT in respect of this issue and hence the Ld PCIT was not justified in initiating revision proceedings in respect of this issue. As in the case of CIT vs. Nagesh Knitwears (P) Ltd [2012 (6) TMI 65 - DELHI HIGH COURT] has held that the CIT should conduct necessary enquiries and come to the conclusion that the assessment order is erroneous and the view taken by the AO is unsustainable in law, i.e., the view expressed by Ld PCIT should be in accordance with law and then only, he could hold that the assessment order is erroneous. When the view taken by Ld PCIT itself is not in accordance with law, then the revision order passed by Ld PCIT could not be sustained. From the foregoing discussions, it can be noticed that the view taken by Ld PCIT in respect of the first issue is not sustainable in law. With regard to the second issue, the Ld PCIT has misdirected himself and in fact, there is no clarity at all in his directions. Hence, we are of the view that the view taken by Ld PCIT in respect of both the issues is not sustainable in law, in which case, the impugned revision order is liable to be quashed. Accordingly, we quash the impugned revision order passed by Ld PCIT. Appeal of the assessee is allowed.
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