Section 57(iii) allowability of expenditure requires fresh nexus-based review where company had no business activity and earned only interest income.

Expenditure claimed against income from other sources required fresh examination under section 57(iii) because the company had no business activity in the year and earned only interest income. The lower authorities had not considered whether the expenses had a direct or indirect nexus with that income or whether they were necessary to preserve the company's corporate status after nationalisation of its coal mines under the Companies Act, 1956 and the Coal Mines (Nationalisation) Act, 1973. The disallowance was not finally upheld, and the matter was restored to the Assessing Officer for reconsideration.

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Issues: Whether the assessee's claimed expenditure was allowable under section 57(iii) of the Income-tax Act, 1961 while computing income from other sources, and whether the matter required reconsideration in light of the company's obligation to retain its corporate status after nationalisation of its coal mines.

Analysis: The company had no business activity during the relevant year and earned only interest income assessable under the head income from other sources. The expenditure claimed was not examined by the lower authorities from the standpoint of its direct or indirect nexus with that income or from the standpoint of expenses necessary to maintain the company's status under the Companies Act, 1956 after the nationalisation of its coal mines under section 32 of the Coal Mines (Nationalisation) Act, 1973. The claim therefore required a fresh factual and legal examination under section 57(iii), rather than rejection merely because no business was carried on.

Conclusion: The disallowance was not finally sustained and the matter was restored to the Assessing Officer for fresh consideration of the allowability of the expenditure.

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