TaxTMI 
TaxTMI 
2020 (3) TMI 955
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....s erred both on facts and in law in confirming the disallowance of an amount of Rs. 6,05,398/- on account of expenditure claimed by the assessee under section 57(iii) of the Income Tax Act. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law in confirming the disallowance despite the fact that the interest expenditure have been incurred wholly and exclusively for the purpose of earning the interest income. 4. On the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law in confirming the disallowance by arbitrarily rejecting the explanation and evidence brought on record by the assessee in this regard. 5. The appellant craves leave to add, amend or alter any....
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....nvestment. However, due to non-materialization of deal the available funds of the assessee were invested by him in Fixed Deposit @9%, so as to earn interest income from the same. The assessee earned interest income amounting to Rs. 16,17,144/- and incurred interest expenses amounting to Rs. 25,94,468/- on account of loans taken from following NBFCs, resulting in the net interest loss of Rs. 9,77,324/-. The details of deduction claimed under section 57 of the Act, which is attached in Paper Book at Pages 15- 17. After considering the facts and circumstances of the case, the AO made the disallowance u/s. 57 of the Act by holding that "the loss that the expenses incurred for the purpose of investment is not substantiated by placing any materia....
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....ition in dispute is contrary to law and facts on the file and therefore, the same is hereby deleted. My aforesaid view is fully supported by the following case laws:- i) The Hon'ble SC in the case of CIT Vs. Rajendra Prasad Moody, [1978] 115 ITR 519 (SC) has held as under: "What s. 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. It is the purpose of the expenditure that is relevant in determining the applicability of s. 57(iii) and that purpose must be making or earning of income. s. 57(iii) does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction. It does not say that the expenditure shall ....
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....tter also permitted the Assessee to further utilise the money borrowed to advance loans to others. The sum of Rs. 25 crores drawn by the Assessee on 24th December 2001 in terms of HSBC's sanction letter was transferred to SCL on the very same date. Without the facility of credit by the HSBC, the Assessee could not have advanced the loan to SCL. Therefore, there was a direct nexus between the earning of interest on the loan advanced by the Assessee to SCL and payment of interest to HSBC on the loan drawn in terms of the sanction letter dated 2nd August 2001. The income earned on the loan advanced to SCL was rightly offered to tax by the Assessee as 'income from other sources', Since the interest paid to HSBC on the loan availed w....