VITTHALBHAI VASHRAMBHAI DHAMELIYA,SURAT vs. INCOME TAX OFFICER, WARD 3(3)(1), SURAT

ITA 398/SRT/2026Status: DisposedITAT Surat11 August 2026AY 2016-177 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the nexus between borrowed funds and loans advanced was established, as the AO himself noted that loans were granted after obtaining funds from banks/NBFCs. Therefore, the interest expense was allowable under Section 57 of the Act.

What were the facts?

The assessee claimed interest expenses against interest income earned from loans advanced to parties. The Assessing Officer disallowed these expenses, stating that the genuineness of the allowability of interest expenses remained unexplained. The CIT(A) confirmed the AO's action.

What were the issues?

Whether interest expenses incurred on borrowed funds utilized for advancing loans are deductible against interest income earned from such loans.

Which sections of the Income-tax Act were involved?

Section 57

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Appellant: Shri Sapnesh Sheth, CA
For Respondent: Shri Ajay Uke, Sr. DR
Hearing: 19/05/2026

Per, Dr. Arjun Lal Saini, AM: Captioned two appeals filed by the assessee, pertaining to Assessment Year 2016-17 & 2017-18, are directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi, dated 15.09.2025, which in turn arises out of an order passed by the Assessing Officer u/s 143(3) of the Act, on 07.12.2018. 2. When the matter was called for hearing,

The order continues below.

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