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ITAT allowed the assessee's appeal, holding that proportionate expenditure is deductible u/s 57(iii) against interest income taxed under the head "income from other sources" u/s 56. It observed that the Revenue had not disputed the genuineness of expenses or the audited books u/s 44AB, and that denial of deduction solely for lack of one-to-one nexus was contrary to law. For a co-operative credit society, administrative and financial expenses are inherently linked to earning interest from deployment of business funds. The disallowance was therefore set aside and deduction u/s 57 was directed to be granted.
ITAT allowed the assessee's appeal, holding that proportionate expenditure is deductible u/s 57(iii) against interest income taxed under the head "income from other sources" u/s 56. It observed that the Revenue had not disputed the genuineness of expenses or the audited books u/s 44AB, and that denial of deduction solely for lack of one-to-one nexus was contrary to law. For a co-operative credit society, administrative and financial expenses are inherently linked to earning interest from deployment of business funds. The disallowance was therefore set aside and deduction u/s 57 was directed to be granted.
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