Tribunal remands interest-disallowance dispute under section 57(iii) for de novo adjudication

5-Second Takeaway

The Tribunal remanded the section 57(iii) dispute over disallowance of excess interest expenditure, holding that the outcome of the preceding year’s appeal on the genuineness of unsecured loans would bear on allowability in the relevant year. The CIT(A) was directed to decide the matter afresh after giving the assessee adequate and reasonable opportunity of hearing.

The appeal concerned disallowance of excess interest expenditure claimed against interest income under section 57(iii). The assessee had borrowed on unsecured loans, and the interest paid on those loans had been treated as unexplained cash credits in the preceding assessment year.

The Tribunal noted that the appeal for assessment year 2013-14 turned on the genuineness of those unsecured loans and the related interest claim. Since the earlier year’s outcome could affect whether the interest expenditure was allowable in the year under consideration, the issue could not be finally concluded on the existing record.

The matter was therefore restored to the CIT(A) for de novo adjudication. The Tribunal also directed that the assessee be given adequate and reasonable opportunity of hearing.

The appeal was allowed for statistical purposes through remand.