Surjeet Singh Vs ACIT (ITAT Agra)
No Fresh Loans, No Fresh Nexus—57(iii) Deduction Restored—AO Cannot Re-examine Nexus Every Year
Assessee, engaged in liquor business & partner in firms, declared interest income of Rs.1,17,97,996 & claimed interest expenditure of Rs.1,21,87,907, resulting in loss of Rs.8,89,911 under income from other sources. AO disallowed interest paid u/s 57(iii) on the ground that Assessee failed to prove one-to-one nexus between borrowed funds & loans advanced. NFAC upheld disallowance.
Tribunal noted that no fresh borrowings or fresh advances were made during the year; both interest-earning & interest-paying loans were continuing from earlier years. The nexus had already been examined & accepted by AO in scrutiny assessments for AYs 2013-14 to 2015-16, & again accepted by CIT(A) in AYs 2018-19 & 2020-21, where categorical findings holding that Assessee had established nexus & was entitled to deduction u/s 57(iii). Tribunal held that when loan structure remains unchanged, there is no requirement to re-prove nexus every year, especially when earlier & subsequent years have been accepted by Department.
Assessee had also furnished complete opening loan balances, interest-paid details, loan-advance balances & interest-received details before AO, but AO ignored these & mechanically disallowed claim. Tribunal held disallowance unjustified & directed AO to allow deduction of Rs.1,04,576 ( towards interest paid u/s 57(iii). Appeal allowed in full.
