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Facts
The assessee appealed an order restricting his interest expenditure claim under section 57(iii) of the Income Tax Act. The lower authorities disallowed the differential rate of interest (3.4%) as a deduction, considering the interest income received was only 6%. This was based on the assessee being a director and availing loan facilities.
Held
The Tribunal noted that the issue of limiting interest expenditure claim under section 57(iii) only to the extent of interest income received had already been settled by a previous Tribunal decision. Therefore, the impugned disallowance was deleted.
Key Issues
Whether interest expenditure claimed under section 57(iii) of the Income Tax Act can be limited to the extent of interest income received or realized.
Sections Cited
57(iii), 143(3)
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. Satbeer Singh Godara
ORDER This assessee’s appeal for Assessment Year 2018-19 arises against the CIT(A)/NFAC, Delhi’s DIN & order No. ITBA/NFAC/S/250/2025-26/1081748523(1) dated 14.10.2025, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties at length. Case file perused.
Coming to the assessee’s sole substantive ground raised herein, a perusal of the case file indicates that both the learned lower authorities have restricted his interest expenditure claim u/s 57(iii) of the Act for the sole reason that since he is a director in M/s Shamsons Polymers (P) Ltd. and had availed interest bearing loans facility from M/s HSBC Bank whereas the realization of interest thereupon from the company happens to Deepak Batra be only @ 6%. It is in this factual backdrop that both the learned lower authorities are of the considered view that the assessee is not entitled for the differential rate of interest @3.4% as deduction against his interest income u/s 57(iii) of the Act. They have disallowed the same in assessment order dated 12.03.2021 as upheld in the lower appellate discussion in other words.
Faced with this situation, it is noticed that the tribunal in Mahendra Singh Meel Vs. ITO, decided on 29.10.2019 has already settled the issue that the impugned section 57(iii) interest expenditure claim could not be limited only to the extent of the interest income received or realized thereupon; as the case may be. I accordingly delete the impugned disallowance in very terms.
No other ground or argument has been pressed.