Interest cannot be allowed as a deduction on loan used for buying agricultural land: Kerala HC
M/S. MINI MUTHOOTTU CREDIT INDIA (P) LTD. (ITA NO. 76 OF 2019)
Facts:
- Mini Muthoot Credit India (P) Ltd. (Appellant) was engaged in asset management services during the assessment year 2012-13.The appellant declared a total income of Rs. 1,08,22,440/-.
- However, it was assessed to a total income of Rs. 2,02,75,110/-.The assessing officer disallowed an interest expense of Rs. 90,73,279/-, as it was incurred on long-term borrowings used to purchase agricultural land.
- The appellant appealed to the Commissioner of Income Tax (Appeals), who ruled in favor of the appellant without sufficient evidence.The revenue then appealed to the Income Tax Appellate Tribunal, which upheld the disallowance, stating lack of evidence that the land was used for business purposes.
- The appellant contended that the interest expense should be deductible under Section 36(1)(iii) of the Income Tax Act as the land is used for business purposes and shown as such in the balance sheet and challenged the tribunal’s decision.
Hon Kerala HC held as below:
- Despite the land being shown as a business asset in the balance sheet, it was actually used for agricultural purposes, generating exempt agricultural income.
- So, the expenses could not be considered as incurred for business purposes under Section 36(1)(iii).
The copy of the order is as under:
