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2024 (3) TMI 771 - AT - Income Tax


Issues:
The judgment involves the disallowance of interest expenses under section 57(iii) of the Income Tax Act, 1961.

Issue 1: Disallowance of Interest Expenses
The appeal challenges the disallowance of interest expenses amounting to Rs. 54,32,948 under section 57(iii) of the Income Tax Act, 1961 for Assessment Year 2013-14. The Assessing Officer disallowed a portion of the interest expenses related to loans taken by the assessee, where the interest paid was higher than the rate charged on the loans advanced. The disallowance was calculated based on the difference between the rates of interest. The Tribunal held that the disallowance was not sustainable as the expenses were incurred for the purpose of earning income, meeting the conditions of section 57(iii) of the Act. The Tribunal emphasized the essential requirement of a clear nexus between the expenditure incurred and the income sought to be earned, dismissing the disallowance made by the authorities. The Tribunal noted that the Assessing Officer's interpretation of the provisions was incorrect, as the expenditure incurred solely for the purpose of earning income qualifies for deduction under section 57(iii) of the Act. The Tribunal concluded that the disallowance of interest expenses was unwarranted and directed its deletion, allowing the appeal of the assessee.

Conclusion:
The Appellate Tribunal ITAT Ahmedabad ruled in favor of the assessee, allowing the appeal and directing the deletion of the disallowed interest expenses under section 57(iii) of the Income Tax Act, 1961 for Assessment Year 2013-14.

 

 

 

 

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