Interest expenditure linked to interest-bearing advances is deductible against taxable interest income when the borrowing nexus is established.

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....Interest expenditure on borrowings used to make interest-bearing unsecured advances is deductible against taxable interest income under section 57 where the nexus is established. The Assessing Officer's findings showed that the advances to private parties were funded through interest-bearing loans from banks and non-banking financial companies. As the borrowing cost was directly connected with earning the interest income assessed under income from other sources, the disallowance was deleted for the relevant assessment years.....