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Section 57 of the Income-tax Act, 1961 - Income from other sources - Deductions - Assessment year 1977-78 - Whether, where dominant purpose of assessee in taking overdrafts was not to earn income by way of interest or dividend but to meet personal liability of payment of income-tax and wealth-tax, interest payment on such overdrafts was not an allowable deduction under section 57(iii) - Held, yes FACTS The assessee was assessed in the status of HUF. While framing assessment the ITO rejected the claim of the assessee for deduction of amount of interest paid on overdrafts taken for payment of income-tax and wealth-tax. The ITO was of the view that the claim of the assessee was not tenable because the overdrafts were taken for meeting the personal expenses of the assessee and not for earning interest or dividend. On appeal, the Commissioner (Appeals) affirmed the order of the ITO. The appeal filed by the assessee before the Tribunal in that behalf was also dismissed. On reference: HELD In order to justify the claim for deduction under section 57(iii ), the assessee had to satisfy the ITO that the loan, interest in respect of which was claimed as deduction, was laid out or expended wholly and exclusively for earning the income from out of which the deduction was claimed. In the instant case, the dominant purpose of the assessee in taking overdrafts was not to earn income by way of interest or dividend but to meet the personal liability of payment of income-tax and wealth-tax. The Tribunal, was, therefore, right in holding that interest payment on overdrafts was not an allowable deduction under section 57(iii). Note: The decision was in favour of Revenue. CASE REFERRED TO Padmavati Jaikrishna v. Addl. CIT [1987] 166 ITR 176 (SC). H.S. Shrivastava for the Applicant. B.K. Rawat for the Respondent. JUDGMENT G.G. Sohani, Actg., CJ. -By this reference under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal has referred the following question of law to this court for its opinion: "Whether, on the facts and in the circumstances of the case, the interest payment of Rs. 93,837 on bank overdrafts was an…

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