2024 (10) TMI 746 - AT - Income Tax

Deduction of interest paid to bank against interest income offered to tax while computing income from other sources - HELD THAT - We find that scrutiny assessment for AY 2016-17 was framed on the assessee wherein, the very same query was raised by the AO vide notice u/s 142(1) - assessee filed a reply proving one to one nexus thereon. AO on being satisfied with the same completed the assessment for the AY 2016-17 u/s 143(3) on 30.11.2018 granting deduction for interest paid to Allahabad Bank while computing income from other sources. The very same claim for a different figure is being made in the year under consideration. During the year, there is no requirement for the assessee to prove the nexus between borrowed funds and its utilization as it had already been proved by the assessee in AY 2016-17 and accepted by the revenue. Accordingly, we hold that the assessee would be eligible for deduction of interest paid to Allahabad Bank u/s 57(iii) of the Act. Accordingly, the grounds raised by the assessee are allowed.

Summary

The appeal in ITA No.3472/Del/2023 for AY 2017-18 was allowed by the ITAT Delhi. The only issue was whether the assessee can claim deduction of interest paid to bank against interest income. The assessee utilized borrowed funds for advancing a loan and claimed deduction, which was denied by lower authorities. However, since the nexus was proven in a previous assessment year and accepted by the revenue, the deduction was allowed.