DCIT Vs Mahesh Kumar Goyal (ITAT Chandigarh)
The Income Tax Appellate Tribunal (ITAT), Chandigarh Bench, has dismissed an appeal filed by the revenue in the case of DCIT Vs Mahesh Kumar Goyal, pertaining to Assessment Year (AY) 2012-13. The Tribunal’s decision, pronounced on July 15, 2025, upholds the order of the Commissioner of Income Tax (Appeals)-3, Ludhiana [CIT(A)], which had partially deleted an interest disallowance made by the Assessing Officer (AO) under Section 57(iii) of the Income-tax Act, 1961.
The central issue in the appeal was the disallowance of interest expenditure claimed by the assessee, Mahesh Kumar Goyal, against interest income earned. For AY 2012-13, Mr. Goyal reported an interest income of Rs. 245.37 Lacs, derived from six different persons or entities. This income was offered to tax under the head ‘income from other sources’. Against this, the assessee claimed an interest expenditure of Rs. 296.67 Lacs, stated to have been paid to 13 entities.
The AO, during the assessment framed under Section 143(3) of the Act on March 31, 2015, directed the assessee to justify the interest expenditure claim in terms of Section 57(iii). This section allows for the deduction of expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income. While the assessee provided some explanation and even made a suo-motu disallowance of Rs. 27.36 Lacs, the AO observed that the assessee maintained mixed funds and utilized them for both income-generating and non-productive activities. Citing the absence of a direct nexus between the interest-bearing borrowed funds and the interest-yielding investments, the AO proceeded to disallow the entire claimed interest expenditure of Rs. 296.67 Lacs.
