Case Law Details
Shri Mahendra Singh Meel Vs. ITO (ITAT Jaipur)
The issue under consideration is whether the interest expense can be disallowed u/s 57(iii) on the ground that rate of interest paid was higher that rate of interest received in own case?
ITAT states that Section 57(iii) requires 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. Accordingly, when the interest expenditure was laid out by the assessee for earning the interest income, then the rate of interest for payment of interest is not relevant for the purpose of allowing the deduction under section 57(iii) of the Act. The authorities below have committed an error while disallowing the claim of interest on the ground that the payment in case of one party is at a higher rate than the interest earned by the assessee from such expenditure. The orders of the authorities below are accordingly set aside and claim of the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order dated 17.10.2017 of CIT (Appeals)-2, Jaipur for the assessment year 2014-15. The assessee has raised the following grounds of appeal :-
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