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TMI Blog1987 (8) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The assessee set off the said interest of Rs. 7,685 against the interest earned by the assessee from the said FDRs. The aforesaid claim of the assessee was rejected by the ITO as untenable. On appeal, the learned AAC confirmed the order of the ITO. It is against the aforesaid con current finding of the authorities below that the present appeal has been filed by the assessee. 2. On behalf of the assessee the learned counsel submitted that the assessee's claim was allowable u/s 56(3) of the Income-tax Act, 1961 and that in respect of the assessment year 1980-81 the Tribunal had accepted similar claim of the assessee. A copy of the said order of the Tribunal being ITA No. 1966/Del/85 dated30th December, 1986has been placed on record. In p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. We have given very careful consideration to the facts of the present case and the rival submissions. It is well settled principle of law that u/s 57(iii) only such expenditure can bellowed to be deducted as has been incurred to earn the income assessable under the head 'Other sources'. The purpose of the expenditure should to be earn the income, whether income itself has been earned or not is not material. Reference may be made to the judgment of the Hon'ble Supreme Court in the case of CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 in support of the above proposition. Their Lordships explained the scope of sec. 57(iii), inter alia, as follows : -" What section 57(iii) requires is that the expenditure was to be laid out or expended w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on whatsoever between the purpose of the expenditure and the income from interest earned on FDRs and that this be so, there is no question of any deduction u/s 57(iii) of Rs. 7,685 against the said income from FDRs. There is a catena of case law which says that interest paid on moneys borrowed for personal expenses or for payment of advance tax or for payment of annuity deposit or for payment of wealth-tax or for payment of estate duty is not to be allowed as a business expenditure u/s 57(iii). Reference maybe made to the following cases in this regard : 1. Bai Bhuriben Lallubhai v. CIT [1956] 29 ITR 543 (Bom.); 2. CIT v. M. P. Jatia 1972 Tax LR 1016 (All.); 3. Mrs. Arundhati Balakrishna v. CIT [1976] 102 ITR 356 (Guj.); 4. Balmer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. We see no merit in the above submission of the learned counsel for the assessee. The distinction is entirely superfical. What has to be seen is the purpose of expenditure as emphasized by the Hon'ble Supreme Court and if this purpose is not related with the earning of the income which is assessable u/s 56, the expenditure is not to be allowed. It is not material what the purpose of expenditure was, whether it was to discharge the individual liability or whether it was to provide funds to the HUF. In either case it was not to earn the income which was assessable u/s 56, and so it is not deductible u/s 57(iii). 7. Apparently the aforesaid catena of case law and the aforesaid judgment of the Supreme Court were not brought to the attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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