TaxTMI 
TaxTMI 
2019 (12) TMI 867
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.... law and facts. Hence liable to be quashed. 2. That the learned Authorities below have grossly erred in law and facts in making/confirming disallowance of claim of interest expenses of Rs. 1,33,335/- on assumption and presumption basis. Hence the addition is liable to be deleted. 3. The appellant has reserved a right to add, amend or alter any ground or grounds of appeal on or before the appeal hearing." 2. The assessee is an Individual and filed his return of income on 21st March, 2015 declaring total income of Rs. 6,89,140/- which includes income from house property, business and other sources. During the assessment proceedings, the AO noted that the assessee has shown interest income as well as interest payment. From....
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....t or expended wholly and exclusively for the purpose of making or earning income. It does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction. Therefore, there is no such condition that the expenditure shall be deducted only if any income is made or earned. Thus the ld. A/R has submitted that the disallowance made by the AO and confirmed by the ld. CIT (A) is unjustified and not sustainable in law. 4. On the other hand, the ld. D/R has relied upon the orders of the authorities below and submitted that the AO has made the disallowance of interest only in respect of one transaction of payment of interest @ 20% whereas the assessee has earned the interest at the maximum rate of 18%. Thus the AO ....
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....id to a third party which is not related to the assessee, then it is a commercial decision of the assessee to take the funds at an interest rate which may be higher than the normal prevailing rate due to pressing circumstances or urgent need of funds. When the AO has not disputed the correctness of the payment and genuineness of the transaction, then merely because the payment of interest to one of the parties is higher than the average earning of interest, the same cannot be a reason for disallowing the claim of interest expenditure. The only requirement for allowing the deduction under section 57(iii) is that the expenditure has been incurred wholly and exclusively for the purpose of earning the income. Thus the purpose of expenditure is ....
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....to show that the expenditure was a profitable one or that in fact any profit was earned." It is indeed difficult to see how, after this observation of the court, there can be any scope for controversy in regard to the interpretation of s. 57(iii). It is also interesting to note that, according to the revenue, the expenditure would disqualify for deduction only if no income results from such expenditure in a particular assessment year, but if there is some income, howsoever small or meagre, the expenditure would be eligible for deduction. This means that in a case where the expenditure is Rs. 1,000, if there is income of even Re. 1, the expenditure would be deductible and there would be resulting loss of Rs. 999 under the h....
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.... It is true that the language of s. 37(1) is a little wider than that of s. 57(iii), but we do not see how that can make any difference in the true interpretation of s. 57(iii). The language of s. 57(iii) is clear and unambiguous and it has to be construed according to its plain natural meaning and merely because a slightly wider phraseology is employed in another section which may take in something more, it does not mean that s. 57(iii) should be given a narrow and constricted meaning not warranted by the language of the section and, in fact, contrary to such language." Similarly, the Hon'ble Punjab & Haryana High Court in case of CIT vs. Pankaj Munjal Family Trust (supra) has held in para 12 as under :- "12. After hear....