...What I got from all this conversation is that we should divide literature into these two: Mind and Spirit. Every literature which talks rationally and for any worldly outcome should be placed under Mind. On other hand literature deals with emotions, faith and/or supernatural power should be kept under Spirit. As you have mentioned that Iqbal has put many western writers in Muslim culture and we have put many of our writers in Mind of Europe so here instead of dividing it eographically we should divide it as mentioned above.I'm afraid it's not that simple. For instance, Iqbal might be seen as more rational than Eliot. Therefore we need references: the spirit of Muslim Culture, and the mind of Europe. These references provide us the historical context of past, present and future for analyzing and categorizing any work.
I think this is a simple issue but it becomes complex when you are reluctant to perceive Islam as something which could be relevant even to non-Muslims today, and a self-respecting cultural force which neither needs to be servile nore hostile to the trends of modern times. Once you accept this, you don't need to ask theoretical questions about mind, spirit, etc.
Otherwise the questions never end, and each answer increases the complexity, just as the Children of Israel made it difficult for themselves to slaughter a cow by asking questions instead of seeking warmth and light from their faith (reference to Chapter 2 of the Quran).