Interest Paid to Earn Interest Is Allowable: ITAT Allows Section 57(iii) Deduction Despite Ex-parte Assessment

Ankur Chandulal Shah Vs ACIT (ITAT Mumbai) The Mumbai Bench of the ITAT deleted the disallowance of ₹1.06 crore claimed under section 57(iii) towards interest expenditure, holding that the assessee had clearly established a direct and proximate nexus between interest paid and interest earned under the head “Income from Other Sources”. The assessee had earned interest income of about ₹1.77 crore from loans advanced to a company in which he was a director and shareholder, and had funded these advances through borrowings from family members and others, on which interest was paid. Though t...