I.P.MUKERJI, J. - (1.) The Court: It is an admitted position that with borrowed funds, the appellant acquired control of the two companies. The interest paid on the borrowed funds was claimed as an allowable expenditure by the assessee under Section 36(1)(iii) read with Section 57 of the Income Tax Act, 1961. Ms. Banerjee led by Ms. Agarwal, learned counsel, for the appellant also invoked Section 37 of the said Act. This Section is as follows: "S.37. General. - (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".
(2.) Advancing her arguments simply they argued that this expenditure of payment of interest was incurred by the assessee for the purpose of augmenting its business and was allowable by reason of the ratio laid down by a division bench of this Court in Commissioner of Income Tax v. Rajeeva Lochan Kanoria reported in [1994] 208 ITR 616(Cal).
(3.) Section 37 covers expenditure of a general nature which are not classifiable under Sections 30 to 36. But, they ought not to be capital expenditure or personal expenses of the assessee. That expenditure which is wholly and exclusively laid out for the purpose of business or profession shall be allowed in computing the income chargeable.;