THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘A’ NEW DELHI BEFORE SHRI G.S. PANNU, VICE-PRESIDENT AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.9327/Del/2019 Assessment Year: 2016-17

Date of hearing 08.03.2023 Date of pronouncement 04.06.2024

ORDER

PER ANUBHAV SHARMA: JUDICIAL MEMBER:

This appeal has been preferred by the Assessee against the order dated 12.09.2019 of learned Commissioner of Income-

Tax(Appeals)-2, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No. 10212/18- 19 arising out of an appeal before it against the order 12.12.2018 passed under Section 143(3) of Income-Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Circle-5(1), New Delhi (hereinafter referred as the Ld. AO).

2. The return of assessee was selected for scrutiny assessment. Learned Assessing Officer had examined legal and professional expenses paid by the assessee for acquisition of shares of M/s. Marche Retail Private Ltd. and learned Assessing Officer disallowed the same observing that the assessee has shown income from trading and shares and securities and rental income, however, the objects of the company do not show such activities as business objects. Thus, expenses incurred for professional services for purchase of shares of another company was disallowed and learned Commissioner (Appeals) has sustained the same.

2.1 Learned Assessing Officer had disallowed a sum of Rs.76,95,243 being interest on loan against three properties as learned Assessing Officer was of the view that the said house property was rented and appellant is showing rental income from this building, thus, the interest on loan upon the same is not allowable as business deduction. Learned Commissioner (Appeals) has sustained the same with relevant findings in paras 6.5 and 6.7 as follows:

“6.6 The appellant submitted that the loan was not for purchase of property but business loan against mortgage of the property. The Assessing Officer asked for documents of loan to prove the claim but it was not produced. Hence, the addition was made.

6.7 It is seen that A.O had clearly asked for documents of loan but it was not produced. Even during appellate proceeding, no such document was furnished to support the claim of loan against mortgage of property. In view of this, I’m not inclined to interfere with the assessment order. This ground is ruled against the appellant.”

3. Thus, the assessee is in appeal raising following grounds of appeal:

1. That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the AO disallowing professional fee of Rs.25,30,847/- incurred for market research and allied expenses for acquisition of M/s.

Marche Retail Pvt. Ltd.

2.1 That on the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the A.O in disallowing interest expenses of Rs.76,95,243/- on loan against property.

2.2 That without prejudice to the generality of grounds of appeal no.2.1 above, the disallowance of Rs.76,95,243/- is arbitrary and highly expensive.

4. Heard and perused the record.

4.1 In regard to ground no.1, it comes up that the case of assessee is that it had decided to purchase 4,000 shares of M/s. Marche Retail Pvt. Ltd. which was also engaged in running of chain of gourmet food retail source and had business interest similar to assessee. Thus, for the purpose of conducting due diligence and feasibility of acquisition, valuation report of this company was got prepared from M/s. Grand Thornton India LLP whose appointee S.K. Bindal & Co., CA prepared the report. A survey was also got conducted from M/s. Accenture for Entry Strategy Development Services and on account of the same, the expenditure of Rs.25,30,847 was made.

4.2 It appears that the learned tax authorities have fail