Section 57(iii) deduction allowed for charitable donations and related expenditure linked to earning income from other sources.

Expenditure incurred for charitable objects can qualify for deduction under section 57(iii) when it is laid out wholly and exclusively for earning income from other sources. A charitable institution assessed under that head, having not claimed sections 11 and 12, claimed deductions for donations and related outgoings paid to eligible trusts and institutions. The ITAT held that section 57(iii) must be construed broadly and accepted the evidence that the payments were connected with the assessee's charitable purposes. The Revenue's reliance on contrary authority was distinguished on facts, and the disallowance was deleted in favour of the assessee.

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Issues: (i) Whether the assessee was entitled to deduction under section 57(iii) of the Income-tax Act, 1961 for donations and related expenditure claimed against income from other sources.

Analysis: The assessee, a charitable institution, was assessed under the head "income from other sources" because it had not claimed benefit under sections 11 and 12. The dispute was whether the donations paid to eligible trusts and institutions, said to have been incurred for the charitable objects of the assessee, qualified as expenditure laid out wholly and exclusively for earning such income. The Tribunal relied on the principle that section 57(iii) must be construed broadly and that expenditure incurred for the purpose of making or earning income is allowable. It distinguished the Revenue's relied-upon authority on facts and accepted the evidences showing that the payments were made towards the assessee's charitable objects.

Conclusion: The deduction under section 57(iii) was allowable and the disallowance was set aside in favour of the assessee.

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