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TMI Blog2018 (5) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... n confirming the disallowance of Rs..43,25,232/- being expenses claimed under section 57(iii) of the Income Tax Act, 1961 ["Act" in short]. 2. Brief facts of the case are that the assessee, being a non-resident, filed his return of income for the assessment year 2014-15 on 31.07.2014 admitting a total income of Rs..6,40,000/- and claimed large deduction under section 57 of the Act. The case of the assessee was selected for scrutiny and notice under section 143(2) of the Act dated 28.08.2015 was duly served on the assessee. Subsequently, notice under section 142(1) of the Act dated 20.06.2016 was also issued for furnishing various details, which was duly furnished by the assessee. From the return of income, the Assessing Officer noticed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 57 of the Act as expenses incurred in recovering the fixed deposit and interest, resulting a loss of Rs..10,68,950/-. After examining the break-up of expenses furnished by the assessee, the Assessing Officer held that the expenditure is attributable primarily towards securing the capital and cannot be said to be incurred wholly and exclusively for the purpose of earning of the income to qualify deduction under section 57(iii) of the Act and accordingly disallowed and brought to tax the entire expenses claimed by the assessee. 3. The assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee and facts of the case, the ld. CIT(A) confirmed the disallowance of expenses as not admissibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est till the date of order. To get the entire amount deposited in the FDRs along with interest thereon, the assessee has claimed various expenditures, which was disallowed by the Assessing Officer and the same was confirmed by the ld. CIT(A) by treating the same as capital in nature. 5.2 Let us have a glance on the provisions of sections. Clauses (i), (ia), (ii) and (iia) of section 57 of the Act specifically mention to deductions available while computing the income chargeable under the head "Income from other sources". Clause (iii) to section 57 of the Act makes admissible the deduction of any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; incurred wholly and exclusively" for the purpose of the business". Under section 57(iii) of the Act, deduction will not be allowed if the expenditure is not incurred for the purpose of earning income falling under the head "income from other sources". Had the assessee not approached the Hon'ble High Court, he would not have got back the investments along with interest thereon. 5.3 The provisions of the Income-tax Act relating to allowances disclose that the expenditure or outgoing sought to be deducted should bear a character which has a connection with or relation to the particular activity which produces the income or constitutes its source. The expenditure as envisaged by section 57(iii) of the Act should not be in the nature of capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mind in this connection, for, what is relevant is the manifest and immediate purpose and not the motive or personal considerations weighing the mind of the assessee in incurring the expenditure; (vi) if the assessee has no option except to incur the expenditure in order to make the earning of the income possible, such as when he has to incur legal expenses for preserving and maintaining the source of income, then undoubtedly, such expenditure would be an allowable deduction; however, where the assessee has an option and the option which he exercises has no connection with the making or earning of the income and the option depends upon personal considerations or motives of the assessee, the expenditure incurred in consequence of the exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... final conclusion being on of law. 5.5 In view of the broad analysis of the provisions of relevant sections under the Act as well as various case law, we are of the considered opinion that the ld. CIT(A) was incorrect to hold that the above expenditure incurred by the assessee is capital in nature. 5.6 On perusal of the expenditure details furnished by the assessee, the Assessing Officer has not disputed the expenditure incurred by the assessee but objected for claiming the entire expenses in the assessment year 2014- 15. The fate of the assessee to get back his investment was not automatic, but by the directions of the Hon'ble High Court. The Hon'ble High Court of Madras has rendered justice to the assessee by directing the respondent ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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