ITAT Delhi Restores Section 57(iii) Interest Claim: Rule of Consistency to Be Examined

Devinder Ajmani Vs Assessing Officer (ITAT Delhi)

ITAT Delhi Restores Section 57(iii) Interest Claim: Rule of Consistency to Be Examined

The Delhi SMC Bench of the ITAT set aside the order of the NFAC/CIT(A) and restored the issue relating to deduction under section 57(iii) in the case of Devinder Ajmani (AY 2020-21). The assessee, a Director in a private company, had borrowed funds (including a home loan) at a lower interest rate and advanced the same to the company, claiming deduction of interest as expenditure incurred for earning income from other sources.

While the Assessing Officer allowed deduction in respect of Loan Against Property (LAP) accounts, the claim relating to the home loan account was disallowed solely on the ground that it was categorized as a housing loan. The Tribunal noted that on identical facts, deduction under section 57(iii) on interest paid on the home loan had been allowed in earlier assessment years.

Holding that the matter required verification from past records, the ITAT remanded the issue back to the AO with a clear direction that if deduction under section 57(iii) was allowed in earlier years, the same should be allowed in the impugned year as well, following the rule of consistency. Accordingly, the assessee’s appeal was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 13.08.2025, for Assessment Year 2020-21.

2. The solitary issue in the present appeal by the assessee is denial of deduction u/s.57(iii) of the Income Tax Act,1961(hereinafter referred to as ‘the Act’) claimed by the assessee in respect of interest paid Rs.27,16,082/-.

3. Shri R. K Gaur, appearing on behalf of the assessee submits that the assessee is a Director of Harvin Impex P. Ltd. company. The assessee had initially taken Home Loan in the year 2012 from IDFC First Bank Ltd. The loan repayment schedule is at pages 36 to 38 of the paper book. The assessee had advanced the said loan to Harvin Impex P. Ltd. and claimed deduction u/s.57(iii) of the Act. The Assessing Officer (AO) in the impugned assessment year disallowed assessee’s claim of deduction on interest payment of Rs.27,16,082/-. The ld. AR submitted that, the assessee had taken loan under the category of Housing Loan as the rates of interest was cheaper. The purpose of loan was for advancing to the company. The ld. AR further contended that the assessee is claiming deduction u/s.57(iii) of the Act in the past on the said loan and the same was allowed to the assessee. However, in the impugned assessment year the same has been denied on identical set of facts.

4. Per contra, Shri Manoj Kumar representing the department vehemently supporting the impugned order prayed for dismissing appeal of the assessee.

5. Both sides heard, orders of the authorities below examined. The limited issue in the present appeal for consideration is assessee’s eligibility for claiming deduction u/s.57(iii) of the Act in respect of interest on loan advanced to the company wherein assessee is a Director. A perusal of the impugned order shows that the assessee had taken loan under three loan accounts, as under:-

The AO/CIT(A) allowed deduction u/s.57 of the Act in respect of two accounts i.e. at Sr No. 1 & 3 of the above table. Both the said accounts were Loan Against Property (LAP). The AO disallowed deduction u/s.57 of the Act in respect of third loan, where the loan account was for ‘Home Loan’. The contention of the ld. AR is that in the preceding assessment years the deduction claimed u/s.57(iii) of the Act in respect of interest paid on Home Loan account was allowed whereas in the impugned assessment year on identical set of facts assessee’s claim of deduction has been rejected. I deem it appropriate to restore this issue back to the AO for the limited purpose of verification of assessee’s claim of deduction in the past. If deduction u/s.57 of the Act has been allowed to the assessee in respect of Home Loan in the preceding assessment years the same be allowed in the impugned assessment year, following rule of consistency.

6. In the result, impugned order is set aside and appeal of the assessee is allowed for statistical purpose.

Order pronounced in the open court on Wednesday the 14^th day of January, 2026.