Interest-bearing Unsecured Loans are allowable as Income Tax Deduction u/s.57(iii): ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Raipur bench consisting of Ravish Sood, Judicial Member, and Rathod Kamlesh Jayantbhai, Accountant Member held that interest-bearing unsecured loans by allowable as deduction u/s.57(iii) of ITA.

The assessee, Pankaj Surana, had raised interest bearing unsecured loans, on which, interest of Rs. 6,45,531/- was paid by him. The aforesaid interest-bearing borrowed funds were channelized by the assessee for advancing interest-bearing loans to various parties, on which, an interest income of Rs.6,40,874/- was received by him. Qua the aforesaid facts, the assessee had sought for setting-off the interest paid on the borrowed funds against the aforesaid interest income so received by him. However, the Assessing Officer (AO) was not persuaded to subscribe to the aforesaid claim of the assessee. Observing that the assessee had not utilized the unsecured loans for his business purposes, the A.O disallowed his aforesaid claim for setting off of the interest paid against his interest income. Aggrieved, the assessee carried the matter in appeal before the Commissioner of Income Tax (CIT). The assessee being aggrieved with the order of the CIT has carried the matter in appeal before the ITAT. As the assessee appellant despite having been intimated about the hearing of the appeal has failed to put up an appearance before us, therefore, we are constrained to proceed with and dispose of the appeal as per Rule 24 of the Appellate Tribunal Rules, 1962, i.e, after hearing the respondent revenue and perusing the orders of the lower authorities.

The Tribunal observed “As per Section 57(iii) of the Act, any expenditure not being in the nature of capital expenditure, laid out or expended wholly and exclusively for the purpose of making or earning income under the head's income from other sources is to be allowed as a deduction. As the interest-bearing unsecured loans were raised by the assessee with a purpose, intent, and motive of earning interest income by advancing the same to third parties and, have actually been so utilized, therefore, the interest expenditure so borne by him could safely, or in fact, inescapably, be held to have been incurred wholly and exclusively for the purpose of earning of interest income.”

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