TMI Blog2023 (10) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, be held to be conditional upon the making or earning of the income. Since, in the present case there was income earned by the assessee by way of interest, however, the same was not equal to the percentage of interest in terms of interest expenditure incurred but the same could not be a reason to disqualify certain expenditure within the provision of Section 57(iii) when the Hon ble Apex Court, in an deficient situation than in the present case, has held that the expenditure could not be denied merely because there was no income earned during the relevant A.Y. In such circumstances, we are of the considered view that expenditure incurred by the assessee, genuineness of which was not disputed by the A.O are allowable expenditure in terms of provisions of Section 57(iii), thus, addition made by the A.O and confirmed by the CIT(Appeals) are not sustainable. We set aside the order of CIT(A) and direct the A.O to delete the addition made u/s.57(iii) of the Act. Thus, grounds of appeal raised by the assessee are allowed in terms of our aforesaid observations. - Shri Ravish Sood, JM And Shri Arun Khodpia, AM For the Assessee : Shri R.B Doshi, CA For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest @15% was received from all advances given and interest ranging from 15% to 16.8% as paid to various lenders. When chart of interest received and ledger accounts of the advances were further examined by the A.O, he observed that information furnished by the assessee was not fully correct and in following cases interest received was @9%, 9.7% and 14% instead of 15%. A chart of such interest received from the party was reproduced in the assessment order and the same is extracted as under: Name Rate of Interest Interest Balance as on 31.03.2017 Barida Jewellers Pvt. Ltd. 14% 67488 1007272 Yugantar 9% 171040 2054376 Youth Foundation of India 9.70% 652388 7359663 With such observations, the A.O in the cases of two parties from whom the assessee had received interest of 9%, 9.7% had disallowed difference by reducing the said rates from 16% and the disallowance was proposed for Rs. 5,58,088/-. The deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that interest paid to the parties are unrelated parties. It is the argument of the Ld. AR that partial interest expenditure could not be disallowed in absence of there being any specific provision in the Act and merely because interest received was at lower rate than rate at which interest was paid, no disallowance could have been made. The Ld. AR in support of his aforesaid contention relied upon the judgment of the Hon ble Supreme Court in the case of CIT Vs. Rajendra Prasad Moody, (1978) 115 ITR 519 (SC) wherein the Hon ble Apex Court had held as under: 4. 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. It is the purpose of the expenditure that, is relevant in determining the applicability of section 57(iii) and that purpose must be making or earning of income. Section 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 section 57(iii) to suggest that the purpose for which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the ultimate profit or loss would be found. We fail to appreciate how expenditure which is otherwise a proper expenditure can cease to be such merely because there is no receipt of income. Whatever is a proper outgoing by way of expenditure must be debited irrespective whether there is receipt of income or not. That is the plain requirement of proper accounting and the interpretation of section 57(iii) cannot be different. The deduction of the expenditure cannot, in the circumstances, be held to be conditional upon the making or earning of the income. 6. The Ld. AR further submitted that similar issue was dealt with by the Coordinate Bench of the ITAT, Raipur in the case of Shri Pankaj Surana Vs. ITO, Ward-2(2), Durg, ITA No.153/RPR/2018 dated 23.05.2022 wherein the Tribunal on the issue in hand had observed as under: 6. We have heard the ld. Departmental Representative ( DR , for short), perused the orders of the lower authorities and the material available on record. After deliberating at length on the issue in hand we are unable to persuade ourselves to subscribe to the view taken by the lower authorities. As per Section 57(iii) of the Act, any expenditure not being in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is a proper outgoing by way of expenditure must be debited irrespective of whether there is receipt of income or not. That is the plain requirement of proper accounting, and the interpretation of section 57(iii) cannot be different. The deduction of the expenditure cannot, in the circumstances, be held to be conditional upon the making or earning of the income. In view of the aforesaid principle of law laid down by the Hon ble Apex Court, we respectfully following the same, since, in the present case there was income earned by the assessee by way of interest, however, the same was not equal to the percentage of interest in terms of interest expenditure incurred but the same could not be a reason to disqualify certain expenditure within the provision of Section 57(iii) of the Act, when the Hon ble Apex Court, in an deficient situation than in the present case, has held that the expenditure could not be denied merely because there was no income earned during the relevant A.Y. In such circumstances, we are of the considered view that expenditure incurred by the assessee, genuineness of which was not disputed by the A.O are allowable expenditure in terms of provisions of Section 57( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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