Question And Answer
Subject: Deduction of Interest paid from interest Income U/s 57 of the IT Act.
Querist: CA.P.N.Shangari
Answered by:
Tags: , ,
Date: June 23, 2021
Query asked by CA.P.N.Shangari

An individual has taken a loan from bank of Rs2cr and has given as a loan to the firm as a partner.Would like to know whether the interest paid to the bank would be allowed as a deduction from interest income earned from the firm u/s 57(iii) as there being a direct nexus between taking of loan and lending the said amount to the firm.

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Answer given by

If any expenditure is incurred for earning income u/s 56 then the expenses are allowable u/s 57(iii). If the Partnership Agreement provides for interest on loan and bank loan is raised for giving loan to partnership firm then the interest paid on bank loan will be allowed as a deduction u/s 57(iii). In Triumph International Finance India Ltd.v ACIT [2016] 161 ITD 464 (Mum)(Trib) it is held that if there is nexus between the interest received and interest to banks on borrowings , the same is to be allowed as deduction u/s 57(iii) of the Ac

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