Section 57 Deduction Allowable for Interest Expense Incurred to Earn Income from Other Sources: ITAT Raipur

Rajesh Mirani Vs DCIT (ITAT Raipur)

ITAT Raipur held that interest expenditure incurred for earning income chargeable under the head “Income from other sources” is allowable as deduction under section 57 of the Income Tax Act.

Facts- The assessee is an individual. The case was selected for limited scrutiny under CASS on the issue of large deduction claimed u/s 57. On verification of ITR, Audit Report and books of Accounts a/w relevant other documents, AO has observed that the assessee has earned an income from other sources against which, he has claimed a deduction of Rs. 39,86,573/-. Post non-compliance of notice by the assessee, AO made addition of Rs. 39,86,573/- u/s. 57 of the Act.

CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.

Conclusion- Held that the interest and other expenditures claimed u/s. 57 should be bifurcated into two parts i.e. Expenditure eligible for deduction u/s 57 i.e., incurred for earning of income chargeable under the head “Income from other sources” and interest expenditure eligible for deduction u/s 36(1)(iii) i.e., incurred for earning of income chargeable under the head “Income from Business and Profession”.

FULL TEXT OF THE ORDER OF ITAT RAIPUR

The present appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals), NFAC, Delhi, (in short “CIT(A)”), vide order dated 22.11.2023 u/s 250 of the Income Tax Act, 1961 (in short “The Act”), for the Assessment Year 2017-18, which in turn arises from the order of Assistant Commissioner of Income Tax, Circle 2(1), Raipur, (in short “The AO”), u/s 143(3) of the Act, dated 14.11.2019.