Interest income deductions are limited to expenditure actually incurred to earn and collect the income, not pre-business establishment costs.

Interest income assessed under the head "other sources" permitted only the deductions expressly authorised by Section 12 of the Indian Income-tax Act. Expenses for maintaining an establishment for a proposed business, or for keeping a company alive before business commenced, could not be imported from Section 10 or treated as allowable under Section 12. The deductible amount was confined to non-capital expenditure actually incurred solely for earning and collecting the interest income. The Tribunal's allowance was sustained only because it could be supported as an estimate of such actual expenditure, while its broader reliance on establishment expenses was rejected.

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Issues: Whether, in an assessment of interest income under Section 12 of the Indian Income-tax Act, a company that had not yet commenced business could claim office and establishment expenses or other expenditure meant to keep it alive, and whether only expenditure actually incurred in earning and collecting the interest income was deductible.

Analysis: The assessment was made under the head "other sources", so the only deductions available were those authorised by Section 12 itself. Expenses attributable to maintaining an establishment for a prospective business, or to keeping the company alive before business had commenced, could not be imported from Section 10 or treated as allowable under Section 12. The permissible deduction under Section 12 was confined to expenditure, not being capital expenditure, incurred solely for the purpose of making or earning the interest income, that is, expenditure actually incurred in earning and collecting that income. The amount allowed by the Tribunal was not disturbed because it could be sustained as an estimate of such actual expenditure.

Conclusion: The question was answered in the affirmative, but only to the extent that the deduction represented an estimated amount of expenditure actually incurred solely for earning the interest income; the Tribunal's broader basis of allowing establishment expenses was rejected.

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