Interest expenditure deductible under section 57(iii) even without actual income, as the purpose of earning income is sufficient.

Interest expenditure is deductible under section 57(iii) if it is laid out wholly and exclusively for earning income chargeable under the head "Income from other sources"; actual receipt of income is not a precondition. Applying the Supreme Court view followed by the jurisdictional High Court, the disallowance was held unjustified and the addition was deleted in favour of the assessee.

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Issues: Whether interest expenditure was deductible under section 57(iii) of the Income-tax Act, 1961, even though no interest income had actually been earned from the deposits in question.

Analysis: Section 57(iii) allows deduction of expenditure laid out wholly and exclusively for the purpose of making or earning income chargeable under the head "Income from other sources". The governing principle is that the section does not require actual earning of income as a precondition for deduction; it is enough if the expenditure was incurred for the purpose of earning such income. The cited Supreme Court authority, followed by the jurisdictional High Court, supports this construction, and no contrary authority was shown.

Conclusion: The disallowance was not justified. The interest expenditure was allowable under section 57(iii), and the addition was deleted in favour of the assessee.

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