TMI Blog2020 (3) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the act does not anywhere specifies that any income should have been earned as a result of the expenditure incurred. It only specified that the purpose of expenditure should be that of earning income, it is mandatory that income should have been earned by the assessee. Keeping in view the facts and circumstances of the present case, the addition in dispute is contrary to law and facts on the file and therefore, the same is hereby deleted Revenue authority has not doubted the nexus between the loan taken from NBFCs and the amount invested in FDR is not doubted by the Assessing Officer. It is a settled law that the deduction u/s. 57(iii) of the Act will be allowable even if no income is earned by the assessee u/s. 56 of the Act. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law in confirming the disallowance despite the fact that the interest expenditure have been incurred wholly and exclusively for the purpose of earning the interest income. 4. On the facts and circumstances of the case the Ld. CIT(A) has erred both on facts and in law in confirming the disallowance by arbitrarily rejecting the explanation and evidence brought on record by the assessee in this regard. 5. The appellant craves leave to add, amend or alter any of the grounds of appeal. 2. I have heard both the parties and perused the orders of the revenue authorities alongwith the written submissions filed by the Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the same. The assessee earned interest income amounting to ₹ 16,17,144/- and incurred interest expenses amounting to ₹ 25,94,468/- on account of loans taken from following NBFCs, resulting in the net interest loss of ₹ 9,77,324/-. The details of deduction claimed under section 57 of the Act, which is attached in Paper Book at Pages 15- 17. After considering the facts and circumstances of the case, the AO made the disallowance u/s. 57 of the Act by holding that the loss that the expenses incurred for the purpose of investment is not substantiated by placing any material on record except the FDR/Saving from which he earned the interest income of ₹ 16,17,144/-. Under the context assessee s claim of interest payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported by the following case laws:- i) The Hon'ble SC in the case of CIT Vs. Rajendra Prasad Moody, [1978] 115 ITR 519 (SC) has held as under: What s. 57(iii) requires is 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 purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee on 24th December 2001 in terms of HSBC's sanction letter was transferred to SCL on the very same date. Without the facility of credit by the HSBC, the Assessee could not have advanced the loan to SCL. Therefore, there was a direct nexus between the earning of interest on the loan advanced by the Assessee to SCL and payment of interest to HSBC on the loan drawn in terms of the sanction letter dated 2nd August 2001. The income earned on the loan advanced to SCL was rightly offered to tax by the Assessee as 'income from other sources', Since the interest paid to HSBC on the loan availed was in the nature of an expenditure wholly and exclusively laid out for the purpose of earning the interest income, it ought to be permitt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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