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“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

Island Star Mall Developes Private Limited, Mumbai vs. Deputy Commissioner of Income Tax, Circle 6(3)(1), Mumbai

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

ITA 2247/MUM/2023[2013-2014]Status: DisposedITAT Mumbai21 Feb 2024AY 2013-2014

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

business.” 18. The Ld. AR of the assessee submitted that, the CIT(A) has erred in confirming the action of the AO in disallowance of interest expenditure as it was not incurred for the purpose of business. The contentions of the Ld. AR that the assessee has sufficient funds

Island Star Mall Developes Private Limited, Mumbai vs. Deputy Commissioner of Income Tax, Circle 6(3)(1), Mumbai

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

ITA 2246/MUM/2023[2012-2013]Status: DisposedITAT Mumbai21 Feb 2024AY 2012-2013

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

business.” 18. The Ld. AR of the assessee submitted that, the CIT(A) has erred in confirming the action of the AO in disallowance of interest expenditure as it was not incurred for the purpose of business. The contentions of the Ld. AR that the assessee has sufficient funds

Jbm Auto Ltd., New Delhi vs. Addl. CIT, Range- 13, New Delhi

In the result, appeal is partly allowed

ITA 5835/DEL/2017[2014-15]Status: DisposedITAT Delhi21 Feb 2024AY 2014-15

Bench: SHRI SAKTIJIT DEY (Vice President), SHRI M. BALAGANESH (Accountant Member)

Section 14A

assessee in the context of facts and materials on record, learned first appellate authority granted partial relief to the assessee by deleting the disallowance of interest expenditure amounting to Rs.4,23,24,958/- made under Rule 8D(2)(ii). However, she upheld the disallowance of Rs.35,66,390/- under Rule ... result, appeal is partly allowed. AY: 2014-15 26. In ground nos. 1 and 2, the Revenue has challenged the deletion of disallowance of interest expenditure made under Rule 8D(2)(ii) read with section 14A of the Act. The issue raised in these grounds is identical to the issue

Jbm Auto Ltd., New Delhi vs. DCIT, Circle- 13(2), New Delhi

In the result, appeal is partly allowed

ITA 5834/DEL/2017[2013-14]Status: DisposedITAT Delhi21 Feb 2024AY 2013-14

Bench: SHRI SAKTIJIT DEY (Vice President), SHRI M. BALAGANESH (Accountant Member)

Section 14A

assessee in the context of facts and materials on record, learned first appellate authority granted partial relief to the assessee by deleting the disallowance of interest expenditure amounting to Rs.4,23,24,958/- made under Rule 8D(2)(ii). However, she upheld the disallowance of Rs.35,66,390/- under Rule ... result, appeal is partly allowed. AY: 2014-15 26. In ground nos. 1 and 2, the Revenue has challenged the deletion of disallowance of interest expenditure made under Rule 8D(2)(ii) read with section 14A of the Act. The issue raised in these grounds is identical to the issue

DCIT, Circle- 13(2), New Delhi vs. Jbm Auto Ltd., New Delhi

In the result, appeal is partly allowed

ITA 5021/DEL/2017[2014-15]Status: DisposedITAT Delhi21 Feb 2024AY 2014-15

Bench: learned first appellate authority. After considering the submissions of the assessee in the context of facts and materials on record, learned first appellate authority granted partial relief to the assessee by deleting the disallowance of interest expenditure amounting to Rs.4,23,24,958/- made under Rule 8D(2)(ii). However, she upheld the disallowance of Rs.35,66,390/- under Rule 8D(2)(iii).

Section 14A

assessee in the context of facts and materials on record, learned first appellate authority granted partial relief to the assessee by deleting the disallowance of interest expenditure amounting to Rs.4,23,24,958/- made under Rule 8D(2)(ii). However, she upheld the disallowance of Rs.35,66,390/- under Rule ... result, appeal is partly allowed. AY: 2014-15 26. In ground nos. 1 and 2, the Revenue has challenged the deletion of disallowance of interest expenditure made under Rule 8D(2)(ii) read with section 14A of the Act. The issue raised in these grounds is identical to the issue

DCIT, Circle- 13(2), New Delhi vs. Jbm Auto Ltd., New Delhi

In the result, appeal is partly allowed

ITA 5020/DEL/2017[2013-14]Status: DisposedITAT Delhi21 Feb 2024AY 2013-14

Bench: learned first appellate authority. After considering the submissions of the assessee in the context of facts and materials on record, learned first appellate authority granted partial relief to the assessee by deleting the disallowance of interest expenditure amounting to Rs.4,23,24,958/- made under Rule 8D(2)(ii). However, she upheld the disallowance of Rs.35,66,390/- under Rule 8D(2)(iii).

Section 14A

assessee in the context of facts and materials on record, learned first appellate authority granted partial relief to the assessee by deleting the disallowance of interest expenditure amounting to Rs.4,23,24,958/- made under Rule 8D(2)(ii). However, she upheld the disallowance of Rs.35,66,390/- under Rule ... result, appeal is partly allowed. AY: 2014-15 26. In ground nos. 1 and 2, the Revenue has challenged the deletion of disallowance of interest expenditure made under Rule 8D(2)(ii) read with section 14A of the Act. The issue raised in these grounds is identical to the issue

Gallant Freight and Travels Pvt Ltd, Mumbai City vs. The Commissioner of Income Tax, Appeal, Mumbai

In the result, the appeal by the assessee is allowed for statistical purposes

ITA 3964/MUM/2023[2014-15]Status: DisposedITAT Mumbai19 Feb 2024AY 2014-15

Bench: Shri Om Prakash Kant & Shri Sandeep Singh Karhail

For Appellant: Shri N.H. GajriaFor Respondent: Shri Manoj Kumar Singh
Section 115Section 142(1)Section 143(3)Section 250Section 40Section 40A(2)(b)

deducted TDS thereon as applicable.” 4. The issue arising in ground No. 1, raised in assessee’s appeal, pertains to part disallowance of interest expenditure under section 40A(2)(b) of the Act. 5. The brief facts of the case pertaining to this issue, as emanating from the record ... grounds of appeals, if so required.” 23. The issue arising in ground no. 1, raised in assessee’s appeal, pertains to part disallowance of interest expenditure under section 40A(2)(b) of the Act. Since a similar issue arising out of a similar factual matrix has already been decided

Gallant Freight and Travels Pvt Ltd, Mumbai vs. The Commissioner of Income Tax, Appeal, Faceless Centre Delhi, Mumbai

In the result, the appeal by the assessee is allowed for statistical purposes

ITA 3911/MUM/2023[2015-16]Status: DisposedITAT Mumbai19 Feb 2024AY 2015-16

Bench: Shri Om Prakash Kant & Shri Sandeep Singh Karhail

For Appellant: Shri N.H. GajriaFor Respondent: Shri Manoj Kumar Singh
Section 115Section 142(1)Section 143(3)Section 250Section 40Section 40A(2)(b)

deducted TDS thereon as applicable.” 4. The issue arising in ground No. 1, raised in assessee’s appeal, pertains to part disallowance of interest expenditure under section 40A(2)(b) of the Act. 5. The brief facts of the case pertaining to this issue, as emanating from the record ... grounds of appeals, if so required.” 23. The issue arising in ground no. 1, raised in assessee’s appeal, pertains to part disallowance of interest expenditure under section 40A(2)(b) of the Act. Since a similar issue arising out of a similar factual matrix has already been decided

Modi Rubber Ltd., New Delhi vs. ACIT, Circle- 17(1), New Delhi

In the result, Ground no.2 is partly allowed

ITA 6866/DEL/2018[2012-13]Status: DisposedITAT Delhi08 Feb 2024AY 2012-13

Bench: Shri Saktijit Dey- & Shri Pradip Kumar Kedia-

For Appellant: Shri Rohit Jain, AdvFor Respondent: Ms. Smita Singh, Sr.DR
Section 10(34)Section 139(1)Section 143(3)Section 14A

motu disallowance of Rs.6,21,806/- under Section 14A of the Act in the return of income. It was submitted that no disallowance of interest expenditure could have been made owing to sufficient own funds available with the assessee company and hence no interest could be attributed to such investment ... share capital along with reserves stands at Rs.108.26 crore as against investment in share yielding dividend income at Rs.33.35 crore. Thus, the disallowance of interest expenditure under Rule 8D(2)(ii) is not warranted. The disallowance under Rule 8D(2)(iii) is restricted to 0.5% of the average value

Devarshi Commercials LLP, Mumbai vs. DCIT -17(1), Mumbai

In the result, appeal of the assessee is partly allowed for statistical purpose

ITA 1894/MUM/2023[2018-19]Status: DisposedITAT Mumbai07 Feb 2024AY 2018-19

Bench: Shri Vikas Awasthy& Shri Amarjit Singhआअसं.1894/मुं/2023 (िन.व. 2018-19) Devarshi Commercial Llp, 84-A, Mittal Court, Nariman Point, Mumbai 400 021 Pan: Aahfd-1854-E ...... अपीलाथ"/Appellant बनाम Vs. Dy. Commissioner Of Income-Tax-17(1), Mumbai, Kautilya Bhavan, Bandra (East) Mumbai – 400 051 ..... "ितवादी/Respondent Assessee By : Shri Madhur Agrawal, Advocate With Shri Nimesh Vora, Sr.A.R Revenue By : Ms. Agnes P. Thomas सुनवाई क" ितिथ/ Date Of Hearing : 30/11/2023 घोषणा क" ितिथ/ Date Of Pronouncement : 07/02/2024 आदेश/Order Per Vikas Awasthy, Jm: This Appeal By The Assessee Is Directed Against The Order Of Commissioner Of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [In Short ‘The Cit(A)’] Dated 31/03/2023, For The Assessment Year 2018-19. 2. The Assessee In Appeal Has Assailed The Order Of Cit(A) On Solitary Ground I.E. Disallowance Of Interest Claimed U/S. 57(Iii) Of The Income Tax Act, 1961 [In Short ‘The Act’]. The Assessee Vide Application Dated 16/10/2023 Raised Additional Grounds Of Appeal, The Same Read As Under:

For Appellant: Shri Madhur Agrawal, Advocate with Shri Nimesh Vora, Sr.A.RFor Respondent: Ms. Agnes P. Thomas
Section 111ASection 14ASection 36Section 57

assessee is that while examining the second issue the Assessing Officer has overstepped the ‘Laxman Rekha’ of Limited Security and has made disallowance of interest expenditure u/s. 57(iii) of the Act. A perusal of computation of income filed by the assessee reveals that the assessee has not reported ... additional grounds of appeal raised by the assessee are devoid of any merit, therefore, the same are dismissed. 10. The assessee has challenged disallowance of interest expenditure u/s. 57(iii) of the Act on merits as well. The contention of the assessee is that the aforesaid interest is with respect

Asstt. Commissioner of Income Tax Circle 6(1)(2), Mumbai vs. M/S Island Star Mall Developers Pvt Ltd, Mumbai

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

ITA 2357/MUM/2023[2017-18]Status: DisposedITAT Mumbai06 Feb 2024AY 2017-18

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

business.” 18. The Ld. AR of the assessee submitted that, the CIT(A) has erred in confirming the action of the AO in disallowance of interest expenditure as it was not incurred for the purpose of business. The contentions of the Ld. AR that the assessee has sufficient funds

Assistant Commissioner of Income Tax-6(1)(2), Mumbai vs. Island Star Mall Developers Private Ltd, Mumbai

ITA 2356/MUM/2023[2016-2017]Status: DisposedITAT Mumbai06 Feb 2024AY 2016-2017

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI BR BASKARAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL

Asstt. Commissioner of Income Tax Circle 6(1)(2), Mumbai vs. M/S Island Star Mall Developers Pvt Ltd, Mumbai

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

ITA 2355/MUM/2023[2015-16]Status: DisposedITAT Mumbai06 Feb 2024AY 2015-16

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

business.” 18. The Ld. AR of the assessee submitted that, the CIT(A) has erred in confirming the action of the AO in disallowance of interest expenditure as it was not incurred for the purpose of business. The contentions of the Ld. AR that the assessee has sufficient funds

Asstt Commissioner of Income Tax Circle 6(1)(2), Mumbai vs. M/S Island Star Mall Developers Pvt Ltd, Mumbai

ITA 2354/MUM/2023[2014-2015]Status: DisposedITAT Mumbai06 Feb 2024AY 2014-2015

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI BR BASKARAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL

Asstt. Commissioner of Income Tax Circle 6(1)(2), Mumbai vs. M/S Island Star Mall Developers Pvt Ltd, Mumbai

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

ITA 2353/MUM/2023[2013-2014]Status: DisposedITAT Mumbai06 Feb 2024AY 2013-2014

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

business.” 18. The Ld. AR of the assessee submitted that, the CIT(A) has erred in confirming the action of the AO in disallowance of interest expenditure as it was not incurred for the purpose of business. The contentions of the Ld. AR that the assessee has sufficient funds

Assistant Commissioner of Income Tax Circle 6(1)(2), Mumbai vs. M/S Island Star Mall Developers Pvt Ltd, Mumbai

ITA 2352/MUM/2023[2012-13]Status: DisposedITAT Mumbai06 Feb 2024AY 2012-13

Bench: Shri Br Baskaran & Shri Pavan Kumar Gadale

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI BR BASKARAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL

Lakozy Motors Pvt Ltd, Mumbai vs. National Faceless Appeal Centre, Mumbai

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

ITA 2726/MUM/2023[2013-14]Status: DisposedITAT Mumbai05 Feb 2024AY 2013-14

Bench: Shri B.R. Baskaran & Shri Sandeep Singh Karhail

For Appellant: Shri Satyaprakash SinghFor Respondent: Shri Manoj Kumar Sinha
Section 142(1)Section 143(2)Section 143(3)Section 14ASection 250

assessee. Being aggrieved, the assessee is in appeal before us. 4. The first issue raised by the assessee pertains to the disallowance of interest expenditure amounting to INR 21,48,282. 5. The brief facts of the case pertaining to this issue, as emanating from the record, are: During

Yes Bank Ltd., Mumbai vs. DCIT(2)(2)(2), Mumbai

ITA 4278/MUM/2019[2015-16]Status: DisposedITAT Mumbai05 Feb 2024AY 2015-16

Bench: Shri Om Prakash Kant () & Ms. Kavitha Rajagopal ()

Section 14ASection 251Section 35DSection 8D(2)

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA

ACIT - 2(2)(2), Mumbai vs. Yes Bank Limited, Mumbai

ITA 3017/MUM/2019[2015-16]Status: DisposedITAT Mumbai05 Feb 2024AY 2015-16

Bench: Shri Om Prakash Kant () & Ms. Kavitha Rajagopal () Acit-2(2)(2), Room No. 545, 5Th Floor, Aayakar Bhavan, Mumbai-400020. Appellant Yes Bank Ltd., 15Th Floor, Yes Bank Tower, Ifc 2, Senapati Bapat Marg, Elphistone (West), Mumbai-400013. Pan No. Aaacy 2068 D Appellant Assessee By Revenue By Date Of Hearing Date Of Pronouncement

Section 14ASection 251Section 35DSection 8D(2)

aforesaid, having found that the assessee had sufficient interest free funds available to take care of the investment made, we hold that no disallowance of interest expenditure under rule 8D(2)(ii) can be made. Accordingly, we delete the disallowance made under rule 8D(2)(ii)." (Underlined for emphasis

The ACIT, Circle-1(1)(1), Vadodara vs. Dakshin Gujarat Vij Company Ltd., Surat

In the result, the appeal filed by the Revenue is dismissed

ITA 405/AHD/2023[2018-19]Status: DisposedITAT Ahmedabad31 Jan 2024AY 2018-19

Bench: Shri Waseem Ahmed (Accountant Member), Shri T.R. Senthil Kumar (Judicial Member)

Section 115JSection 143(3)Section 32(1)(iia)

justified in deleting the addition of Rs. 16,37,41,000/-made on account of disallowance of interest expenditure which was attributable to capital work in progress and was liable to be capitalized?" The appellant craves leaves to add, modify, amend or alter any grounds of appeal at the time ... dismissed. 30. Solitary issue is whether CIT[A] was justified in deleting the addition of Rs.25,73,24,880/- made on account of disallowance of interest expenditure which was attributable to CWIP and was liable to be capitalized. This identical ground has already been considered by us in ITA No.404/Ahd/2023