25 January 2022
Facts of the case: I invested in a housing project being built by a private builder to get a residential house in the financial year 2013-14. But the builder failed to build the property as promised. I complained regarding the same to local authorities, then to National Consumer Disputes Redressal Commission and finally Supreme Court of India. The Supreme Court ordered the builder to pay interest @9% to me, which I received in the financial year 2021-22.
Query: I am taking this interest income as Income from Other Sources in my income tax return. I want to deduct expenses from this interest income as per sec 57(iii) of the income tax act, 1961. I have incurred legal expenses and traveling/hotel expenses to fight the case in various courts in different cities every year since the financial year 2013-14. Whether I can deduct expenses that I incurred every year since 2013-14?
( As one of the four conditions under 57(iii) is that the expense must be laid out or expended in the relevant previous year and not in any prior or subsequent year.)
[Any other Expenses for Earning Income [Section 57(iii)] Any other expenditure is deductible under section 57(iii) if the following four basic conditions are satisfied: the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning the income; the expenditure must not be in the nature of capital expenditure; it must not be in the nature of personal expenses of the assessee; it must be laid out or expended in the relevant previous year and not in any prior or subsequent year.]