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2018 (2) TMI 297 - AT - Income TaxDisallowance of interest - assessee had claimed that his minor daughter had paid the same to related parties for making investment in the guest house - no income from the guest house has accrued to the minor daughter of the assessee - Held that:- The income from other sources is taxable under the provisions of I.T. Act and these provisions are contained in section 56 onwards. The deductions permitted to be made from the income u/s 56 are contained in section 57 of the Act. The deductions as contained in section 57 are specific and apply to various income under the head income from other sources. Clause (iii) of section 57 states that any other expenditure laid out or expended wholly and exclusively for the purpose of making or earning such income will be allowed as deduction against income from other sources. The assessee had not been able to substantiate that the interest paid by his minor daughter was for earning of any income as defined in section 56 as income from other sources. Rather the assessee has made out a case that the interest was paid on borrowed funds which were utilized for construction of guest house and which too had not become operational. Therefore, we find that authorities below have rightly disallowed the claim. As regards disallowance of interest which the assessee had paid for earning of income under the head income from other sources, we find that the assessee had earned a gross income of ₹ 20,87,296/- which includes interest on FDR and which the assessee has claimed to have utilized the borrowed funds for earning interest. Therefore, this deduction claimed by the assessee is directly covered by the provisions of clause (iii) of section 57 which allows deduction for any expenditure incurred wholly and exclusively for the purpose of earning such income. We further find that the assessee has duly deducted TDS and further the payment of interest is evidenced from the copy of account of lender which reflects that there was opening balance of ₹ 11,08,000/- as unsecured loan in the hands of the assessee. Therefore, we are in agreement with the arguments of the assessee that disallowance was not warranted as the same was paid for earning of the income. - Decided partly in favour of assessee
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