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2023 (4) TMI 1164 - ITAT MUMBAIRevision u/s 263 by CIT - Allowability of deduction u/s.57 - nexus between interest received from the firm and the interest paid to the bank on the term loan not developed - assessee claimed net interest income after claiming interest expenses u/s.57, i.e., interest paid on SBI term loan was claimed as expenditure allowable u/s.57 - assessee has taken term loan from SBI which was given to the partnership firm - HELD THAT:- Assessee has received interest on capital contribution which has been shown separately. Apart from that, it has paid interest on loan taken from the assessee - The loan taken by the firm from the assessee, in turn was taken by the assessee from the SBI. Thus, the assessee received interest on loan given to the firm and on the same loan taken from the bank, the assessee has paid interest. Thus, there was direct nexus between earning of the interest income and interest paid. Accordingly, the netting of the net interest income after deducting the interest paid to the bank had direct nexus which is allowable under Section 57. This aspect of the matter was also examined by the AO and assessee has filed all the replies which were called upon by the AO. No infirmity in allowing the interest paid by the AO and therefore, order of ld. PCIT cannot be sustained, because on merits the assessment order is neither erroneous nor prejudicial to the interest of the Revenue and therefore, on merits, the appeal of the assessee is allowed.
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