TaxTMI 
TaxTMI 
2022 (1) TMI 1046
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....that the interest expense is not attributable to the business shown u/s 44AD. 2. Without prejudice to the above ground, CIT(A) ought to have given further relief to the extent of higher profit shown by the assessee than 8% as prescribed u/s 44AD. 3. It is therefore prayed that assessment framed u/s 143(3) of the Act may kindly be quashed and/or addition made by assessing officer may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 3.Succinct facts are that assessee before us is an individual and is engaged in the business of jarikasab for which he declares income under section 44AD of the Act. In addition to this, the assessee has commission income, rental income and interest income, which is declared by him under relevant, heads. There is no dispute on this. The assessing officer has not disturbed the incomes declared under any other head except income declared under the head income from other sources. The fact is that assessee has shown interest income of Rs. 1,96,111/- against which he has claimed interest expense of Rs. 5,40,627/-. The assessing officer did not agree to it, and ha....
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....then the assessee is entitled to claim the deduction of interest expenses or other expenses which the assessee has incurred to earn said income shown by him under the head "income from other sources" . In this regard, the reliance can be placed on the judgment of the Hon`ble Supreme Court in the case ofCIT vs. Rajendra Prasad Moody (1978) 115 ITR 519 (SC), wherein the Hon`ble Court observed as follows: "The revenue being aggrieved by the decision of the Tribunal made an application in each case for reference of the following question of law, namely: "Whether, on the facts and in the circumstances of the case, interest on money borrowed for investment in shares which had not yielded any dividend is admissible under s. 57(iii)?" And since there was divergence of judicial opinion on this question, the Tribunal referred it directly for the opinion of this court. The determination of the question before us turns on the true interpretation of s. 57(iii) and it would, therefore, be convenient to refer to that section, but before we do so, we may point out that s. 57(iii) occurs in a fasciculus of sections under the heading, "F-Income from other sources". S. 56, which is the first ....
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....ontention of the revenue undoubtedly found favour with the High Court but we do not think we can accept it. Our reasons for saying so are as follows. 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 be deductible only if any income is made or earned. There is in fact nothing in the language of s. 57(iii) to suggest that the purpose for which the expenditure is made should fructify into any benefit by way of return in the shape of income. The plain natural construction of the language of s. 57(iii) irresistibly leads to the conclusion that to bring a case within the section, it is not necessary that any income should in fact have been earned as a result of the expenditure. It may be pointed out that an identical view was taken by this court in Eastern Investments Ltd. v. CIT [19....
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....ircumstances, be held to be conditional upon the making or earning of the income. 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. This view which we are taking is clearly supported by the observations of Lord Thankerton in Hughes v. Bank of New Zealand [1938] 6 ITR 636, 644 (HL), where the learned Law Lord said: "Expenditure in course of the trade which is unremunerative is none the less a proper deduction, if wholly and exclusively made for the purposes of the trade. It does not require the presence of a receipt on the credit | side to justify the deduction of an expense." We find that the same view has been taken by the Madras High Court in Appa Rao v. C....