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2019 (10) TMI 393 - AT - Income TaxDisallowance of interest expenses u/s 57(iii) - HELD THAT:- Section 57(iii) provides for deduction only of expenditure incurred wholly and exclusively 'for the purpose of making or earning such income". In order that expenditure may be admissible under section 57(iii), it is necessary that the primary motive of incurring it is directly to earn income falling under the head "income from other sources". The plain natural construction of the language of section 57(iii) of the Act, irresistibly leads to the conclusions that to bring a case within that section it is not necessary that any income should in fact have been earned as a result of the expenditure. What section 57(iii) requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. The section 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 The expression 'commercial expediency' is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as business expenditure if it was incurred on grounds of commercial expediency. In the present case M/s Finesse jewels is engaged in the business of manufacturing of gems and jewellery. The assessee is a director and shareholder in such company and derives salary and commission income from such company. It has made investment in the company for the purpose of earning the income from the investment either in the form of interest or in the form of dividend or capital gain. Therefore such an advance was clearly given by the assessee for the purpose of commercial expediency. It is to be noted that any advance made to the related/sister concern out of commercial expediency is allowable under the income tax return and any expenses claimed in respect of such advance given can be claimed as deduction u/s 57(iii) /37 of the income tax act, 1961. We allow the claim of the assessee and delete the additions made by the AO and upheld by the ld. CIT(A). In the result, this ground raised by the assessee is allowed.
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