ANIL K SHAH,MUMBAI vs. ITO 29(1)(1), MUMBAI
What did the Tribunal hold?
The Tribunal found that the assessee had earned interest income on fixed deposits and argued that the borrowed funds were used for these investments. However, the nexus was not clearly demonstrated to the Assessing Officer's satisfaction.
What were the facts?
The assessee claimed a deduction for interest expenditure of Rs. 6,11,994 on borrowed funds. The Assessing Officer disallowed this deduction for lack of a clear nexus between the borrowed funds and interest income.
What were the issues?
Whether the interest expenditure on borrowed funds is deductible under Section 57(iii) when the nexus with income from other sources is not clearly established.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH
Shri Anil K. Shah 703, 7th Floor, Suparshva Sarvoday Nagar, Nahur Road ……………. Appellant Mulund (W), Mumbai 400 080 PAN – AAPPS6042M v/s Income Tax Officer ……………. Respondent Ward–29(1)(1), Mumbai Assessee by : Shri Devendra Jain Revenue by : Shri S. Michael Jerald Date of Hearing – 10.12.2019 Date of Order – 13.12.2019
O R D E R PER M. BALAGANESH, A.M.
The present appeal has been filed by the assessee challenging the order dated 20th March 2018, passed by the learned CIT(A)–39, Mumbai, for the assessment year 2013–14.
The only issue to be decided in this appeal of the assessee is, whether or not the learned CIT(A),in the facts and circumstances of the case, was justified in upholding the action of the Assessing Officer
2 Shri Anil K. Shah in disallowance of interest expenditure of ` 6,11,994, paid by the assessee on borrowed funds.
We have considered rival submissions and perused the material available on record. We find that the assessee is a proprietor of M/s. K.J. Steels, engaged in the business of trading and during the year under consideration, the assessee had derived income from other sources. The return of income for the assessment year 2013–14 was filed by the assessee on 27th March 2014, declaring total income of ` 3,00,140. We find that in the said return of income, the assessee had claimed deduction under section 57(iii) of the Income Tax Act, 1961 (for short "the Act") in respect of interest paid in the sum of ` 6,11,994. The Assessing Officer directed the assessee to substantiate the nexus between the interest received on fixed deposit by the assessee and the interest paid on borrowed fund as above along with documentary evidences. The assessee, vide letter dated 3rd March 2016, gave a response before the Assessing Officer. On a perusal of the details furnished by the assessee, the Assessing Officer observed that the assessee had paid interest to various parties against loan taken by him to the tune of ` 5,46,617, and interest paid on overdraft amounting to ` 65,337, thereby totaling to `6,11,994, towards interest paid. We find that the Assessing Officer had observed that the assessee had not clearly demonstrated the nexus between the interest
3 Shri Anil K. Shah income with the interest paid on borrowed funds so as to make him eligible for deduction under section 57(iii) of the Act. Accordingly, the Assessing Officer made disallowance of interest paid under section 57(iii) of the Act in the sum of ` 6,11,994, while completing the assessment. This action of the Assessing Officer was upheld by the learned Commissioner (Appeals).
We find that the learned Authorised Representative had pleaded that the assessee had earned interest income on fixed deposit to the tune of ` 9,49,659. This fact is also evident from the computation of total income enclosed in Page–25 of the paper book filed by the assessee. The learned Authorised Representative also pleaded that the loans borrowed by the assessee were utilized for making investment in fixed deposit which in turn had fetched interest income to the assessee. Accordingly, he argued that the nexus between the interest paid and interest received stand established. The learned Authorised Representative, however, fairly conceded that let this aspect to be factually verified by the Assessing Officer afresh. When this was put before the learned Departmental Representative, he vehemently relied upon the orders of the authorities below. Considering the totality of the facts and circumstances of the case, we deem it fit and proper in the interest of justice and fair play to remand this issue to the file of the Assessing Officer for denovo adjudication in accordance with law.
4 Shri Anil K. Shah The assessee is at liberty to furnish necessary evidences in support of his contentions. Accordingly, ground raised by the assessee is allowed for statistical purposes.
In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on 13.12.2019
More judgments on Section 57(iii)
- Raghuraj Singh Rajawat, Jaipur vs DCIT-ACIT Cirle Silchar/DCIT Circle 1…ITA 143/GTY/2026[2017-2018]Status: Disposed6 Oct 2026AY 2017-2018
- Nagini Cooperative Credit Society Limited… vs ITO, Ward 6(2)(1), Bangalore, BengaluruITA 619/BANG/2026[2023-24]Status: Disposed28 Sept 2026AY 2023-24
- DCIT CC 5.4, Mumbai vs Wadhwagroup Holdings Private Limited, MumbaiITA 3412/MUM/2026[2023-24]Status: Disposed15 Sept 2026AY 2023-24
- DCIT CC 5.4, Mumbai vs Wadhwagroup Holdings Private Limited, MumbaiITA 3411/MUM/2026[2022-23]Status: Disposed15 Sept 2026AY 2022-23
- DCIT CC 5.4, Mumbai vs Wadhwagroup Holdings Private Limited, MumbaiITA 3410/MUM/2026[2016-17]Status: Disposed15 Sept 2026AY 2016-17
Recent GST High Court judgments
Search GST case law →- M/S Larsen And Toubro Limited vs. Joint Commissioner Of Central GST And Anr.Delhi · 27 Oct 2026
- T C Global INDIA Private Limited vs. Principal Commissioner Of Central GST, North DelhiDelhi · 27 Oct 2026
- Kamlasana Impex Private Limited vs. Director General Of GST Intelligence (Hq) Delhi) & Anr.Delhi · 27 Oct 2026
- Ritu Gautam Proprietor Of Ms Heritage International vs. Additional Commissioner Central Goods And Services Tax Appeals Ii Delhi & Anr.Delhi · 27 Oct 2026
- Sutha vs. The State Tax Officer(Inspection-3)Madras · 27 Oct 2026