APURVA ASHWIN DESAI ,MUMBAI vs. ITO WARD 27(3)(1) , MUMBAI

Briefly stated the facts of the case are that the assessee is an individual and is a partner in M/s. Sun VUB from which he derives income from share of profit. The assessee had borrowed funds for investing in partnership firm and on this borrowing, he has paid interest. The borrowing and the payment of interest has not been doubted but the claim of interest paid by the assessee on such borrowings has been disallowed for the simple reason that inadvertently, the same was claimed under the head “income from other sources”. 5. After giving a thoughtful consideration, we are of the considered view that once it has been accepted that the borrowed funds on which interest is paid is invested as capital in the partnership firm, any interest payment should be allowed as deduction from the share of profit and the interest received on capital. Merely because by an inadvertent mistake the interest has been show under the head “income from other sources”, the revenue should not be benefitted by such inadvertent error. We accordingly direct the AO to allow the claim of interest. 6. In the result, appeal of the assessee is allowed. Order pronounced in the Court on 3rd July, 2025 at Mumbai. (SANDEEP SINGH KARHAIL) ACCOUNTANT MEMBER

अपीलाथ! / The Appellant 2. "यथ! / The Respondent 3. संबं&धत आयकर आयु(त / Concerned Pr. CIT 4. आयकर आयु(त ) अपील ( / The CIT(A)- 5. वभागीय तन&ध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड. फाई/ Guard file.