TaxTMI 
TaxTMI 
2023 (10) TMI 619
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.... AO of Rs. 5,58,088. 4. The learned CIT(A) although allowed the ground of appeal as partly allowed however, no relief was granted by the learned CIT(A). 5. The Appellant prays leave of the Hon'ble Tribunal to add, amend, alter any of the Grounds of Appeal." 2. Brief facts in this case are that the assessee is an individual derives income under the head income from house property and profit and gains of business income from other sources, had filed return of income for A.Y.2017-18 on 30.03.2018 declaring total income at Rs. 4,78,990/-. Subsequently the case of the assessee was selected for scrutiny assessment through CASS to examine the issue "large deduction claimed u/s.57". Proceedings were initiated after issuing statutory notices and calling for details. From assessment records, the A.O had observed that the assessee had received interest income and also paid interest to different entities, for which, deduction was claimed u/s.57 of the Act. On verification of the submissions filed by the assessee, it was observed by the A.O that the assessee had received interest income of Rs. 23,88,078/- and bank interest of Rs. 60,978/- against which interest payment ....
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.... outset, the Ld. AR of the assessee submitted that interest received from different parties was offered as income from other sources and deduction in respect of interest payable on unsecured loan was taken against such interest income, the same were reflected in the computation of income of the assessee which is placed at Page 18 to 20 of paper book. It was the argument of the Ld. AR that the A.O himself allowed the interest up to 9% / 9.7%, therefore, there was no allegation by the A.O that such expenditure was not related to interest income. With respect to the allowability of deduction u/s.57(iii) of the Act which deals with the income from other sources, it was submitted by the Ld. AR that deduction of expenditure laid out for earning relevant income, is not doubted by the A.O, therefore, interest expenditure being related to earning interest income or not was never disputed by the revenue, thus, no disallowance is called for. There was no finding of the A.O that interest payment was excessive or unreasonable. The Ld. AR further submitted that Section 58 of the Act provides as to what all expenditures will not be allowed. This section has specific reference to Section 40A & 40(....
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....e 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. 1000/-, if there is income of even Re. 1/-, the expenditure would be deductible and there would be resulting loss of Rs. 999/- under the head 'Income From Other Sources'. But if there is no income, then, on the argument of the Revenue, the expenditure would have to be ignored as it would not be liable to be deducted. This would indeed be a strange and highly anomalous result and it is difficult to believe that the Legislature could have ever intended to produce such illogicality. Moreover, it must be remembered that when a profit and loss account is cast in respect of any source of income, what is allowed by the statute as proper expenditure would be debited as an outgoing and income would be credited as a receipt and the resulting income or loss would be determined. It would make no difference to this process whether the expenditure is X or Y or nil; whatever is the proper expenditure allowed....
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....llowance of Rs. 6,45,531/- made by the A.O. Thus, the Grounds of appeal No.(s) 1 & 2 raised in appeal by the assessee are allowed in terms of our aforesaid observations." With the aforesaid submissions, it was claim of the Ld. AR that the addition made by the A.O and confirmed by the CIT(Appeals) are totally under misinterpretation of the provisions of the Act, therefore, the same needs to be reversed. 7. Contrary to the aforesaid submissions of the Ld. AR, Ld. Sr. DR vehemently supported the orders of the lower authorities. 8. We have heard the rival contentions and perused the material available on record as well as case laws placed before us for our consideration. Having considered the factual matrix of the present case, it is emanating that the assessee had interest income as well as interest expenditure and such transactions of income and expenditure were revealed by the assessee under the head income from other sources. Since the issue pertaining to the allowability of expenditure u/s.57(iii) was dealt with by the Co-ordinate Bench of the ITAT, Raipur and also the issue is squarely covered by the order of the Hon'ble Apex Court in the case of CIT Vs. Rajendra Prasad ....