Section 57(iii) interest disallowance failed where past-year nexus and proportionate computation remained unchanged.

Under section 57(iii), the Tribunal examined whether interest expenditure could be disallowed when the assessee's borrowed funds had already been linked to income-earning deployment in earlier years. It noted that the major borrowings related to prior years, no material change in facts was shown, and the assessee's proportionate disallowance matched the approach accepted in the preceding year. On that factual and consistency basis, the excess interest disallowance was deleted and the revenue's challenge failed.

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Issues: Whether the revenue was justified in challenging deletion of the interest disallowance made under section 57(iii) of the Income-tax Act, 1961.

Analysis: The assessee's interest income and interest expenditure were examined in the light of the past assessment years, where the nexus of borrowed funds with income-earning deployment had already been verified and only a partial disallowance had been made. The Tribunal noted that the major borrowings pertained to earlier years, that no material change in facts was shown, and that the assessee's working of proportionate disallowance was consistent with the approach accepted in the earlier year.

Conclusion: The deletion of the excess interest disallowance was upheld and the revenue's challenge failed.

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