Law:

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Section 57 of the Income-tax Act, 1961 - Income from other sources - Deductions - Assessment year 1968-69 - Whether interest on loan taken by assessee to meet her personal expenses and tax liability was not deductible in computing assessee's income under head 'other sources' - Held, yes - Whether expenditure incurred by assessee on account of payment of fees to various tax-practitioners could not be said to have been laid out or expended wholly and exclusively for purpose of earning dividend income and, therefore, it was not permissible deduction under section 57(iii) - Held, yes Section 57, read with section 37(1) of the Income-tax Act, 1961 - Income from other sources - Deductions - Whether implication of section 57(iii) is narrower than that of section 37(1) and, therefore, decisions given in context of section 37(1) cannot be straightaway applied to cases falling under section 57(iii) - Held, yes Words and phrases: Word 'business' as occurring in section 37(1) of the Income-tax Act, 1961. FACTS The assessee derived her income from dividends and also received some income by way of interest on annuity deposit. The assessee claimed a deduction under section 57(iii) in respect of the interest on the outstanding loan and in respect of the fees paid to various tax practitioners. As regards the first claim, the ITO concluded that a part of the loan was taken by the assessee to meet her personal expenses and tax liability and he, therefore, disallowed the claim in so far as it related to the interest payable on that part of the loan. The second claim was disallowed on the ground that expenditure of that nature could not be said to have been incurred wholly and exclusively for the purpose of making or earning dividend income. The AAC agreed with the decision of the ITO. The Tribunal upheld the order of the ITO relating to disallowance of interest. The Tribunal, however, allowed the claim pertaining to the fees paid to the tax practitioners. On reference: HELD In view of the decision of the same High Court in Smt. Padmavati Jaikrishna v. CIT [1975] 101 ITR 153, the interest on loan taken by the assessee to meet her personal expenses and tax liability was not…

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