SURJEET SINGH,AGRA vs. ACIT 1(1)(1) AGRA, AGRA

PDF · subscribers
ITA 385/AGR/2025Status: DisposedITAT Agra04 December 2025AY 2017-18Bench: SHRI M. BALAGANESH (Accountant Member), SHRI SUNIL KUMAR SINGH (Judicial Member)4 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since no fresh loans were borrowed or advanced in the current year, and the nexus was established in earlier years, the assessee was entitled to the deduction for interest paid. The disallowance by the lower authorities was deemed unjustified.

What were the facts?

The assessee claimed a deduction for interest paid on loans under the head 'income from other sources'. The Assessing Officer and NFAC disallowed this deduction, stating a lack of one-to-one nexus between interest paid and received. However, the loans were taken and advanced in earlier years, with no fresh borrowings or advancements in the current year.

What were the issues?

Whether the disallowance of interest paid on loans under 'income from other sources' is justified when the nexus was established in prior years and no fresh borrowings/advancements occurred in the current year.

Which sections of the Income-tax Act were involved?

Section 57(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AGRA BENCH “DB”: AGRA

For Appellant: Shri Rajendra Sharma, Adv
For Respondent: Shri Anil Kumar, Sr. DR
Hearing: 18/11/2025Pronounced: 04/12/2025

O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2017-18, arises out of the order of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. NFAC’, in short] dated 19.06.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 21.12.2019 by the Assessing Officer, Agra (hereinafter referred to as ‘ld. AO’).

2.

The only effective issue to be decided in this appeal is as to whether the ld NFAC was justified in confirming the disallowances of interest paid on loans in the sum of Rs. 102,04,576/- under the head income from other sources in the facts and circumstances of the instant case.

3.

We have heard the rival submissions and perused the material available on record. The assessee is an individual derived income from various forms in the form of share profit along with remuneration and interest in the capacity of partner. Apart from this the assessee also deriving business income from sale and purchase of liquor under the name and style Mr. Surjeet Singh as proprietor. The assessee had disclosed business income at Rs. 63,19,713/- in the return. The assessee had disclosed business loss of Rs. 3,89,911/- under the head income from other sources worked out as under:- a. Interest from Saving Bank A/c. Rs. 18,704/- b. Sale Mud Rs. 15,93,420/- c. interest received Rs. 1,01,85,872/- Rs. 1,17,97,996/- Interest paid Rs. 1,21,87,907/- Loss (-) 8,89,911/-

4. The assessee has taken huge amount of loan from various persons and had paid interest thereon. These loans were admittedly taken in earlier years. Similarly, the assessee had granted loans to various persons and earned interest income. Admittedly, these loans were given in earlier years. In other words no fresh borrowings were made during the year by the assessee and no fresh loans were given by the assessee during the year. It is not in dispute that the interest income earned on loan has been offered by the assessee under income from other sources. Accordingly, the deduction claimed on account of interest paid on loans by the assessee become allowable as deduction u/s 57(iii) of the Act if the nexus between the borrowed funds and fund advanced have been proved by the assessee in the year of borrowings and in the year of advancing loans i.e. in the earlier years in the scrutiny assessment proceedings for AYs 2013-14 to 2015-16. In the earlier scrutiny assessment proceedings the ld AO had duly granted deduction on account of interest paid on loans under the head income from other sources. Even in subsequent AYs i.e. 2018-19 and 2020-21, the ld AO disallowed the interest paid on loans under the head income from other sources. But the ld CIT(A) disallowed the same after giving a categorical findings in para 4.2 of the appellate order for AY 2018-19 and 4.3 of appellate order for AY 2020-21 categorically stating that the assessee had indeed established the nexus between the interest expenses claimed and the interest income received and accordingly allowed deduction for interest paid on loans u/s 57(iii) of the Act under the head income from other sources.

4.

The lower authorities in the instant year had stated that the assessee had not provided one to one nexus between the interest paid and interest received. Accordingly, they had denied the deduction on account of interest paid on loans u/s 57(iii) of the Act. In our considered opinion, when the fresh loans are neither borrowed nor granted during the year, there is no question of proving any nexus between the same. Despite this assessee had given the complete details of opening balance of loans borrowed together with the details of interest paid thereon before the ld AO. Similarly, the assessee had given the details of opening balance of loans and advances and interest income earned thereon before the ld AO. Despite the aforesaid facts, the ld AO proceeded to disallow the interest on loans under the head income from other sources while completing the assessment, which stood upheld by the ld NFAC.

5.

As stated earlier there is no need the assessee to prove the nexus between interest paid and interest received in the instant case as admittedly the nexus had already been proved by the assessee in earlier years and in subsequent years and more particularly when there was no fresh loans borrowed or fresh loans granted during the year under consideration. Hence, in view of the aforesaid observation, we have no hesitation to direct the ld AO to grant deduction on account of interest paid on loans u/s 57(iii) of the Act in the sum of Rs. 10,04,576/- under income from other sources. Accordingly, grounds raised by the assessee are allowed.

6.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 04/12/2025.

More judgments on Section 57(iii)

All 716 judgments and leading authorities on Section 57(iii) →

Recent GST High Court judgments

Search GST case law →