“disallowance of interest expenditure”

DisallowancesSection 36(1)(iii)Section 36(1)(iii)785 judgments

The decision most relied on for disallowance of interest expenditure is CIT v. Reliance Utilities & Power Ltd. (313 ITR 340), cited in 2,118 judgments on BharatTax.

Leading authorities on disallowance of interest expenditure

CIT v. Reliance Utilities & Power Ltd.

313 ITR 340 · 2009 · High Court

2,118

citing judgments

Where an assessee claims that investments were made out of own funds, interest disallowance under Section 14A read with Rule 8D may not apply if the assessee demonstrates the availability of sufficient interest-free funds to cover such investments.

CIT v. HDFC Bank Ltd.

366 ITR 505 · 2014 · High Court

1,261

citing judgments

When an assessee possesses interest-free funds sufficient to cover investments yielding tax-free income, it is presumed that such investments were made from these interest-free funds, precluding disallowance of interest expenditure under Section 14A.

Godrej & Boyce Mfg. Co. Ltd. v. DCIT

328 ITR 81 · 2010 · High Court

1,183

citing judgments

Rule 8D, for computing disallowance under Section 14A for expenses related to exempt income, applies from Assessment Year 2008-09 onwards; for prior years, a reasonable disallowance must be made. The disallowance under Section 14A cannot exceed the actual exempt income earned.

South Indian Bank Ltd. v. CIT

438 ITR 1 · 2021 · Supreme Court

508

citing judgments

The mixed fund theory is affirmed, holding that no disallowance of interest expenditure under Section 14A can be made if the assessee possesses sufficient non-interest bearing funds, such as capital and reserves, to cover investments made in tax-free securities.

CIT v. Reliance Industries Ltd.

410 ITR 466 · 2019 · Supreme Court

501

citing judgments

When mixed funds are available, interest-free advances are presumed to be made from the assessee's own interest-free funds, preventing disallowance of interest expenditure under section 36(1)(iii). This principle also applies to section 14A disallowance, where interest expenditure is not disallowed if surplus funds are available and no direct nexus is established with borrowed funds for investments earning exempt income.

CIT v. Dalmia Cement (Bharat) Ltd.

254 ITR 377 · 2002 · High Court

417

citing judgments

When there is a nexus between an expenditure and the purpose of business, incurred on grounds of commercial expediency, the Revenue cannot question its reasonableness or assume the role of the businessman to compel profit maximization. This principle applies even if the business is not that of the assessee itself.

HDFC Bank Ltd. v. DCIT

383 ITR 529 · 2016 · High Court

408

citing judgments

Where an assessee has sufficient interest-free funds, investments yielding exempt income are presumed to be made out of such funds, precluding disallowance of related interest expenditure under section 14A.

Hero Cycles Pvt. Ltd. v. CIT

379 ITR 347 · 2015 · Supreme Court

361

citing judgments

The Revenue cannot substitute its judgment for that of a businessman regarding the necessity or reasonableness of an expenditure. If an expense is incurred wholly and exclusively for business purposes, it is deductible, and the Revenue cannot question its commercial expediency.

Judgments citing disallowance of interest expenditure

M/S. Tamilnadu Transmission Corpn. Ltd., Chennai vs. ACIT, CC-3(1), Chennai

The appeal stand allowed for statistical purposes

ITA 2040/CHNY/2024[2016-17]Status: DisposedITAT Chennai15 Jan 2025AY 2016-17

Bench: Hon’Ble Shri Aby T. Varkey, Jm & Hon’Ble Shri Manoj Kumar Aggarwal, Am 1. आयकरअपील सं./ Ita No.2794/Chny/2019 (िनधा*रण वष* / Assessment Year: 2016-17) & 2. आयकरअपील सं./ Ita No.2040/Chny/2024 (िनधा*रण वष* / Assessment Year: 2016-17) M/S Tamilnadu Transmission Corp. Ltd. Acit बनाम #144, Npkrr Maligai, Anna Salai, Corporate Circle-3(1), / Vs. Chennai-600 002. Chennai. "थायीलेखासं./जीआइआरसं./Pan/Tan No. Aadct-4780-A (अपीलाथ"/Appellant) : (""थ" / Respondent) अपीलाथ"कीओरसे/ Appellant By : Shri R. Vijayaraghavan (Advocate) – Ld.Ar ""थ"कीओरसे/Respondent By : Shri Nilay Baran Som (Cit) -Ld. Dr सुनवाईकीतारीख/Date Of Hearing : 31-12-2024 घोषणाकीतारीख /Date Of Pronouncement : 15-01-2025 आदेश / O R D E R Manoj Kumar Aggarwal ()

For Appellant: Shri R. Vijayaraghavan (Advocate) – Ld.ARFor Respondent: Shri Nilay Baran Som (CIT) -Ld. DR

Section 143(3)

Excess Transmission Charges for Rs.75.74 Crores; (v) Excess Billing for Rs.6.70 Crores; (vi) Excess Operation and Maintenance Charges for Rs.10.90 Crores; (vii) Disallowance of interest expenditure for Rs.2.06 Crores; (viii) Disallowance of employees and other costs for Rs.7.85 Crores. 1.4 The assessee is engaged in transmission of power ... assessee subject to verification by Ld. AO that this revenue was offered to tax in earlier years. 4.6 The next item is disallowance of interest expenditure for Rs.2.06 Crores and disallowance of employees and other costs for Rs.7.85 Crores. The Ld. CIT(A) denied the deduction of the same

Tamilnadu Transmission Corporation Ltd., Chennai vs. ACIT Corporate Circle 3(1), Chennai

The appeal stand allowed for statistical purposes

ITA 2794/CHNY/2019[2016-17]Status: DisposedITAT Chennai15 Jan 2025AY 2016-17

For Appellant: Shri R. Vijayaraghavan (Advocate) – Ld.ARFor Respondent: Shri Nilay Baran Som (CIT) -Ld. DR

Section 143(3)

Manju Dudala, Hyderabad vs. Income Tax Officer, Ward-11(3), Hyderabad

In the result, appeal ITA

ITA 665/HYD/2024[2017-18]Status: DisposedITAT Hyderabad08 Jan 2025AY 2017-18

Bench: Shri Vijay Pal Rao & Shri Manjunatha G

For Appellant: Shri V. Siva Kumar, AdvocateFor Respondent: Shri B. Bala Krishna, CIT-DR

Rules, 1962. In response, the assessee submitted that, it has made suo motu disallowance of direct expenses relatable to exempt income, however, not disallowed any interest expenditure and other expenses, because of investment made in mutual funds which is out of own funds and not from borrowed funds. The assessee ... does not or shall not form part of total income. In other words, after substituting Rule (2) of Rule 8D, the concept of disallowance of interest expenditure and other expenditure are separately dispensed with. Therefore, the findings recorded by the learned CIT(A) in light of decision

Mehrunnisan Sherwani, Okhla vs. Income Tax Officer W 28(1), Delhi

In the result, appeal of the Revenue is dismissed and CO of the assessee is allowed

ITA 4728/DEL/2024[2012-2013]Status: DisposedITAT Delhi06 Jan 2025AY 2012-2013

Bench: Shri Vikas Awasthy & Shri S Rifaur Rahmanआअसं.1977/धिल्ली/2013(नि.व. 2009-10) Sahara India Commercial Corporation Ltd., Sahara India Sadan, 2A, Shakespeare Sarani, Kolkata 700071 ...... अपीलार्थी/Appellant Pan: Aadcs-6118-F बिाम Vs. Deputy Commissioner Of Income Tax, Central Circle-6, R. No. 334, E-2, Ara, ..... प्रनिवादी/Respondent Centre Jhandewalan Extn. New Delhi आअसं.4728, 2795, 4729, 4730 और 4731/धिल्ली/2017(नि.व. 2010-11 से 2014-15)

Section 142

find no reason to interfere with findings of the CIT(A). The Revenue has assailed the order of CIT(A) in deleting the disallowance of interest expenditure, however, no material has been referred to controvert findings of the CIT(A). We find no infirmity in the findings

Shantiben K Rita, Goregaon West vs. ITO Ward 41(4)(4), Kautilya Bhavan

In the result, the appeal of the assessee is allowed

ITA 3406/MUM/2024[2020-21]Status: DisposedITAT Mumbai06 Jan 2025AY 2020-21

Bench: Shri Amarjit Singhshri Sandeep Singh Karhailshantiben K Rita, 1601, Laburnum Tower, Sv Road, Goregaon West, ……………. Appellant Mumbai - 400104 Pan – Aecpr3455A V/S Ito, Ward-41(4)(4), ……………. Respondent Kautilya Bhavan, Mumbai Maharashtra Assessee By : Shri Surji D. Chheda, Ca Revenue By : Shri Bhangepatil Pushkaraj Ramesh, Sr.Dr

For Appellant: Shri Surji D. Chheda, CAFor Respondent: Shri Bhangepatil Pushkaraj Ramesh, Sr.DR

Section 142(1)Section 143(2)Section 250Section 57

business prudence or business expediency of any nature or at any level. Accordingly, the learned CIT(A) upheld the disallowance of interest expenditure of Rs.60,53,499/-. Being aggrieved, the assessee is in appeal before us. 6. We have considered the submissions of both sides and perused the material available

The DCIT, Circle-1(1)(1), Vadodara vs. Gujarat State Fertilizer & Chemical Ltd, Vadodara

In the result, the appeal of the assessee is partly allowed

ITA 538/AHD/2020[2016-17]Status: DisposedITAT Ahmedabad17 Dec 2024AY 2016-17

Bench: Dr. B.R.R. Kumar, Vice-Shri Siddhartha Nautiyal

For Appellant: Shri Manish J. Shah, Shri Jimi Patel and Shri Rushin Patel, ARsFor Respondent: Shri Durga Dutt, CIT (DR) &

Section 115Section 115JSection 143(3)Section 144(2)Section 14ASection 35Section 80GSection 8D(2)(ii)

record. ITA No. 348/Ahd/2020 – Assessee’s appeal Disallowance u/s 14A : 8. On going through the record, we find that in respect of disallowance of interest expenditure under Section 14A read with Rule 8D, the Hon’ble Gujarat High Court, in assessee’s own case ... 99/2019 held that where interest free own funds substantially exceed the investment in exempt income yielding securities, there was no justification in making disallowance of interest expenditure. In respect of disallowance of administrative expenditure, Hon’ble Gujarat High Court has deleted the disallowance computed in accordance with Rule

Gujarat State Fertilisers and Chemicals Ltd., Vadodara vs. The ACIT Circle-1(1)1(), Vadodara

In the result, the appeal of the assessee is partly allowed

ITA 348/AHD/2020[2016-17]Status: DisposedITAT Ahmedabad17 Dec 2024AY 2016-17

Bench: Dr. B.R.R. Kumar, Vice-Shri Siddhartha Nautiyal

For Appellant: Shri Manish J. Shah, Shri Jimi Patel and Shri Rushin Patel, ARsFor Respondent: Shri Durga Dutt, CIT (DR) &

Section 115Section 115JSection 143(3)Section 144(2)Section 14ASection 35Section 80GSection 8D(2)(ii)

Sbpl Infrastructure Limited, Hyderabad vs. DCIT., Circle-3(1), Hyderabad

In the result, appeal filed by the assessee is allowed for statistical purpose

ITA 685/HYD/2024[2014-15]Status: DisposedITAT Hyderabad16 Dec 2024AY 2014-15

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं /Ita No.685/Hyd/2024 (निर्धारण वर्ा/Assessment Year: 2014-15) Sbpl Infrastructure Vs. Deputy Commissioner Limited Of Income Tax Hyderabad Circle-3(1) [Pan : Aaccs9014M] Hyderabad (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee By: Shri Sashank Dundu, Ar रधजस् व द्वधरध/Revenue By: Shri M.Vijay Kumar,Cit-Dr सुिवधई की तधरीख/Date Of Hearing: 04/12/2024 घोर्णध की तधरीख/Date Of 16/12/2024 Pronouncement: आदेश / Order Per. Manjunatha G., A.M: This Appeal Filed By The Assessee Is Directed Against The Order Passed By The Learned Commissioner Of Income Tax (Appeals) [Learned Cit(A)], National Faceless Appeal Centre (Nfac), Delhi Dated 13.02.2024 & Pertains To A.Y.2014-15. 2. This Appeal Filed By The Assessee Is Time Barred By 94 Days. The Assessee Filed A Petition For Condonation Of Delay & Submitted That Shri Manoj Sharma, Chief Financial Officer Of The Appellant Company, Who Was Entrusted With The Job Of Looking

For Appellant: Shri Sashank Dundu, ARFor Respondent: Shri M.Vijay Kumar,CIT-DR

Section 14A

source for investment in shares and securities, out of own funds, then the Assessing Officer is directed to delete the additions made towards disallowance of interest expenditure under Rule 8D(2)(ii) of Income Tax Rules, 1962. In other words, total disallowance computed by the Assessing Officer u/s 14A r.w.s.8D

Ashwin S. Mehta (Legal Heir of Late Rasila S. Mehta), Mumbai vs. ACIT, CC- 4(1), Mumbai

Appeal is allowed for

ITA 295/MUM/2024[2020-21]Status: DisposedITAT Mumbai13 Dec 2024AY 2020-21

Bench: Shri Amarjit Singhshri Sandeep Singh Karhail

For Appellant: Shri Dharmesh ShahFor Respondent: Dr. P. Daniel (Spl. Counsel for the Department)

Section 142(1)Section 143(2)Section 143(3)Section 234BSection 250Section 3(2)Section 68

assessee at INR 468,05,63,910 after making additions under section 68 of the Act on account of capital balance and disallowance of interest expenditure. 6. The learned CIT(A), vide impugned order, after taking into consideration the addition on account of personal household expenditure made in the assessment ... assessee at INR 468,05,63,910 after making additions under section 68 of the Act on account of capital balance and disallowance of interest expenditure. Thus, the addition on account of personal withdrawals was neither the subject matter of assessment nor the source of income which was considered expressly

Ramee Hotels Private Limited, Mumbai vs. Deputy Commissioner of Income Tax Central Circle 6 2 Mumbai, Mumbai

ITA 4302/MUM/2024[2012-13]Status: DisposedITAT Mumbai11 Dec 2024AY 2012-13

Bench: Shri Om Prakash Kant & Ms. Kavitha Rajagopal

For Appellant: Shri. Mandar VaidyaFor Respondent: Smt. Sanyogita Nagpal

Section 132Section 143(3)Section 153ASection 153C

basis of documents for which satisfaction was recorded while initiating proceedings u/s 153C of the Act. For ready reference, the addition made for disallowance of interest expenditure on lease hold land made ( bold letters) in AY 2018-19 is reproduced as under: 6. Accordingly, the total income of the assessee

Ramee Hotels Private Limited, Mumbai vs. Asst. Commissioner of Income Tax Central Circle 6 2 Mumbai, Mumbai

In the result, the appeals of the assessee are allowed

ITA 4300/MUM/2024[2013-14]Status: DisposedITAT Mumbai11 Dec 2024AY 2013-14

Bench: Shri Om Prakash Kant & Ms. Kavitha Rajagopal

For Appellant: Shri. Mandar VaidyaFor Respondent: Smt. Sanyogita Nagpal

Section 1Section 132Section 153ASection 153C

proceedings u/s 153C of the Act. For ready reference, initiating proceedings u/s 153C of the Act. For ready reference, the addition made for disallowance of interest expenditure o the addition made for disallowance of interest expenditure on n lease hold land made ( bold letters

Ramee Hotels Private Limited, Mumbai vs. Asst. Commissioner of Income Tax Central Circle, Mumbai

In the result, the appeals of the assessee are allowed

ITA 4298/MUM/2024[2014-15]Status: DisposedITAT Mumbai11 Dec 2024AY 2014-15

Bench: Shri Om Prakash Kant & Ms. Kavitha Rajagopal

For Appellant: Shri. Mandar VaidyaFor Respondent: Smt. Sanyogita Nagpal

Section 1Section 132Section 153ASection 153C

Ramee Hotels Private Limited, Mumbai vs. Asst. Commissioner of Income Tax Central Circle 6 2 Mumbai, Mumbai

In the result, the appeals of the assessee are allowed

ITA 4297/MUM/2024[2015-16]Status: DisposedITAT Mumbai11 Dec 2024AY 2015-16

Bench: Shri Om Prakash Kant & Ms. Kavitha Rajagopal

For Appellant: Shri. Mandar VaidyaFor Respondent: Smt. Sanyogita Nagpal

Section 1Section 132Section 153ASection 153C

Ramee Hotels Private Limited, Mumbai vs. Asst. Commissioner of Income Tax Central Circle 6 2 Mumbai, Mumbai

In the result, the appeals of the assessee are allowed

ITA 4295/MUM/2024[2017-18]Status: DisposedITAT Mumbai11 Dec 2024AY 2017-18

Bench: Shri Om Prakash Kant & Ms. Kavitha Rajagopal

For Appellant: Shri. Mandar VaidyaFor Respondent: Smt. Sanyogita Nagpal

Section 1Section 132Section 153ASection 153C

Ramee Hotels Private Limited, Mumbai vs. Asst Commissioner of Income Tax Central Circle 6 2 Mumbai, Mumbai

In the result, the appeals of the assessee are allowed

ITA 4293/MUM/2024[2018-19]Status: DisposedITAT Mumbai11 Dec 2024AY 2018-19

Section 132Section 143(3)Section 153ASection 153C

Deputy Commissioner of Income Tax, Mumbai, Aayakar Bhavan vs. Firefly Market Research India Private Limited, Mumbai

In the result, the appeal by the Revenue is dismissed

ITA 4184/MUM/2024[2015-16]Status: DisposedITAT Mumbai09 Dec 2024AY 2015-16

Bench: Shri Om Prakash Kantshri Sandeep Singh Karhailassessment Year 2015-16

For Appellant: Shri Ajit JainFor Respondent: Ms. Rajeshwari Menon, Sr. DR

Section 143(3)Section 250Section 40Section 40A(2)(b)Section 40a

limited enquiries in line with the mandate of ‘limited scrutiny’ and made addition accordingly. In First Appellate proceedings, the CIT(A) made 7 disallowance of interest expenditure Rs.17,34,520/- under section 36(1)(iii) of the Act. The contention of the assessee is that the CIT(A) has enhanced ... making disallowance in First Appellate proceedings in a case 8 selected for ‘limited scrutiny’ to examine disallowance of interest expenditure u/s 14A of the Act. 10. In the case of Amit Kumar Dey vs. DCIT in ITA No. 5526/Del/2018 for AY 2015- 16 decided on 30/3/2021, the case was selected

Maaz Mohammed Yusuf Shaikh, Mumbai vs. Assessing Officer, Mumbai

In the result, the appeal filed by the assessee is allowed

ITA 603/MUM/2024[2016-17]Status: DisposedITAT Mumbai27 Nov 2024AY 2016-17

Bench: Shri Br Baskaran () & Shri Raj Kumar Chauhan () Assessment Year: 2016-17 Maaz Mohammed Yusuf Shaikh, Assessing Officer, Ward-17(2)(3), A-1308, 13Th Floor, Ozone Biz Centre, Mumbai-400012. Bellasis Road, Boman Behram Marg, Vs. Mumbai-400 008. Pan No. Axpps 2316 F Appellant Respondent

For Appellant: Mr. Jayant BhattFor Respondent: Mr. Umesh Chandra Sinha

Section 57

relates to the assessment year 2016-17. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the disallowance of interest expenditure of Rs.21,84,655/-. 2. The facts relating to the case are discussed in brief. The assessee is an Individual. He is a partner ... received interest income from M/s Excellent Realtors Developer in the immediately preceding year and did not receive interest income in this year. The disallowance of interest expenditure has been made by the AO only for the reason that the assessee did not earn interest income in this year. Once

Atul Krishna, Meerut vs. DCIT Central Circle, Meerut

In the result, the appeal of the assessee is allowed

ITA 1887/DEL/2024[2015-16]Status: DisposedITAT Delhi25 Nov 2024AY 2015-16

Bench: Shri Satbeer Singh Godara & Shri M. Balaganeshatul Krishna, Vs. Dcit, 1, Ambedkar Bhawan, Central Circle, Subharti Puram, Meerut, Meerut Uttar Pradesh (Appellant) (Respondent) Pan:Aaypk2016J Assessee By : None Revenue By: Ms. Kanchan Garg, Sr. Dr Date Of Hearing 13/11/2024 Date Of Pronouncement 25/11/2024

For Appellant: NoneFor Respondent: Ms. Kanchan Garg, Sr. DR

Section 143(3)Section 36(1)(iii)Section 57Section 69A

learned DR and based on materials available on record. 3. The ground No. 1 raised by the assessee is challenging the confirmation of disallowance of interest expenditure of Rs 1,50,045/-. Atul Krishna 4. We have heard the learned DR and perused the materials available on record. The assessee

ACIT-3(4), Mumbai vs. Reliance Industries Limited, Mumbai

In the result, the appeal of the Revenue is dismissed whereas the appeal of the assessee is allowed

ITA 2898/MUM/2024[2016-17]Status: DisposedITAT Mumbai22 Nov 2024AY 2016-17

Bench: Shri Om Prakash Kant () & Ms. Kavitha Rajagopal () Assessment Year: 2016-17 Reliance Industries Ltd., Dy. Cit Circle 3(4), 3Rd Floor, Maker Chamber Iv 222 Room No. 559, Aayakar Bhavan, Nariman Point, Vs. Maharshi Karve Road, Mumbai-400021. Mumbai-400020. Pan No. Aaacr 5055 K Appellant Respondent Assessment Year: 2016-17 Acit-3(4), Reliance Industries Ltd., Room No. 481(2), 4Th Floor, 3Rd Floor, Maker Chamber Iv Aayakar Bhavan, N.M. Road, Vs. Nariman Point, New Marine Lines, Mumbai-400021. Mumbai-400020. Pan No. Aaacr 5055 K Appellant Respondent

For Respondent: Mr. Madhur Agrawal

Section 14ASection 271(1)(c)Section 32A

penalty under Section 271 [1J(c) of the Income-tax Act, 1961 which the Tribunal had deleted. The quantum additions pertain to disallowance of interest expenditure under Section 14A of the Act read with Rule 8D of the Income-tax Rules, 1962.: 3. We do not find any evidence

Vag Infotech, Delhi vs. Assistant Commissioner of Income Tax, Circle-53(1), New Delhi, Delhi

In the result, the Assessee’s appeal is allowed for statistical purposes

ITA 3572/DEL/2024[2013-14]Status: DisposedITAT Delhi18 Nov 2024AY 2013-14

Bench: Shri Shamim Yahya & Shri Vimal Kumara.Yr. : 2013-14 Vag Infotech, Vs. Acit, Circle 53(1), D-42, South Extension Part-I, New Delhi New Delhi – 110 049 (Pan: Aaafv2681C) (Appellant) (Respondent)

For Appellant: Dr. Rakesh Gupta, AdvFor Respondent: Sh. Amit Katoch, Sr. DR

Section 14ASection 234ASection 45Section 50C

also and the same were based on incorrect facts and findings and in violation of principles of natural justice. (a) Rs.6,84,207/- disallowance of interest expenditure. (b) Rs.2,919/- disallowance u/s 14A. (c) Rs. 19,358/- adhoc disallowance under the head Telephone Expenses, Diesel & Petrol Expenses and depreciation