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TMI Blog2024 (7) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... roperties. HELD THAT:- On a bare perusal of section 57(iii) of the Act, it is evident that for claiming under this section such expenditure has to be incurred wholly and exclusively for earning such income. In this case, it is apparent that there is no nexus between incurring of interest expenditure and Income from Other Sources earned by the assessee which are mainly from interest on fixed deposits and interest on saving bank accounts and therefore, clearly in absence of any correlation between incurring of expenditure and earning of interest income, in our view, CIT(A) has correctly held that such interest expenditure cannot be allowed in the hands of the assessee, since for such expenditure to be allowed as a deduction, the same has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming addition of Rs. 10,87,419/- invoking provisions of section 14A though the said provision is not applicable. The addition needs deletion. 6. Taking into consideration the legal, statutory, factual and administrative aspects, no addition of an amount of Rs. 10,87,419/- ought to have been made. The additions need deletion. 7. Without prejudice, the assessment confirmed is bad in law and deserves annulment. 8. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided. The assessment needs annulment. 9. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided at appeal stage. 10. The appellant craves leave to add/alter/amend and/or substitute any or all ground of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the delay of 63 days in filing of the present appeal. 4. On merits, the brief facts of the case are that the assessee has filed return of income for assessment year 2009-10 declaring income for Rs. 15,65,680/-. During the course of assessment, the Assessing Officer observed that the assessee had debited the interest expenses amounting to Rs. 10,87,419/-. On detailed verification of the ledger account of interest expenses, the Assessing Officer observed that assessee has paid interest to bank and various depositors and claimed deduction of Rs. 10,87,419/- against "Income from Other Sources" amounting to Rs. 29,556/- as shown in the computation as total income. The assessee was asked to explain as to why such interest expenses amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x refund (Rs. 374/-) and therefore, the Assessing Officer was of the view that section 57(iii) of the Act provides that for claiming such deduction, expenditure has to be incurred wholly and exclusively for earning such income. However, in this case, "income from other sources" is mainly from interest on fixed deposits and interest on saving bank accounts and the interest expenses incurred by the assessee do not have any nexus with earning of such interest income by the assessee. Considering the facts of the case, the A.O. held that it cannot be said that interest paid to depositors or to banks was incurred for the purpose of earning interest income on FDR and interest on saving bank account. Accordingly, the Assessing Officer disallowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 14A of the Act which deals with expenditure incurred towards earning of income which is not liable to tax. However, in this case, the income of Rs. 10,18,626/- being interest received from partnership firms on account of capital invested in the firm and also remuneration derived from the partnership firms is the taxable income of the assessee on which the provision of section 14A have no applicability. Further, the assessee submitted that the assessee has also declared short term capital gain of Rs. 17,16,341/- but the assessment order is silent on this income. The assessee has submitted a chart giving details of interest and remuneration from various firms and submitted that the assessee has earned interest on capital fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no interest expenditure was required to be separately incurred to earn the same. 9. We have heard the rival contentions and perused the material on record. At this juncture, it would be useful to reproduce the relevant extracts of section 57(iii) of the Act for ready reference:- "Sec. 57(iii): "deductions under the head "Income from other Sources" shall be allowed if any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly or exclusively for the purpose of making or earning such income." 9.1 On a bare perusal of section 57(iii) of the Act, it is evident that for claiming under this section such expenditure has to be incurred "wholly and exclusively" for earning such income. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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