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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

Taxila Gurukul P.Ltd, New Delhi vs. ACIT, Circle-25(1), New Delhi

The appeal of the assessee is partly allowed

ITA 7707/DEL/2018[2014-15]Status: DisposedITAT Delhi18 Jan 2023AY 2014-15

Bench: Sh. N. K. Billaiya & Sh. Anubhav Sharmaassessment Year: 2014-15

Section 201Section 24Section 40Section 4o

directed the AO to compute the income in accordance with the code prescribed u/s. 28 to sec. 43D, taking into consideration the disallowance of interest expenditure under the provision of section 40(a)(ia) and compute the income accordingly and accordingly enhanced the income treating the rental income as income

Mgs Securities P.Ltd, New Delhi vs. DCIT, Circle-16(2), New Delhi

In the result, appeal of the assessee is 11

ITA 519/DEL/2019[2015-16]Status: DisposedITAT Delhi17 Jan 2023AY 2015-16

Bench: Shri Anil Chaturvedi & Shri Narender Kumar Choudhary

For Appellant: -None-For Respondent: Sh. Jeetender Chand, Sr.DR
Section 143(3)

arbitrary hence, liable to be deleted. 7. On the facts and in the circumstances of the case, respondent has grossly erred in making disallowance of interest expenditure based on last year's facts and 5 ITA.No.519/Del./20189 MGS Securities P. Ltd. figures and without appreciating the facts and figures

Addl. CIT, Special Range- 7, New Delhi vs. Power Links Transmission Ltd., New Delhi

In the result, the appeal filed by the Revenue Department stands dismissed

ITA 7322/DEL/2018[2015-16]Status: DisposedITAT Delhi16 Jan 2023AY 2015-16

Bench: Shri Shamim Yahya & Shri N.K. Choudhryassessment Year: 2015-16

For Appellant: Sh. Vishal Kalra, Ld. AdvFor Respondent: Sh. Vinod Kumar, Ld. CIT-DR
Section 115JSection 250(6)Section 36Section 36(1)(iii)

Assessing Officer under Section 36(1)(iii) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) on account of disallowance of interest expenditure. He states that the ITAT has failed to appreciate that the assessing company had used the borrowed funds for non-business purposes. He states

Dy.CIT Cent. Cir-8(1), Mumbai vs. M/S Raymond Apparel Ltd, Mumbai

In the result, appeal filed by the revenue is dismissed

ITA 2333/MUM/2021[2011-12]Status: DisposedITAT Mumbai30 Dec 2022AY 2011-12

Bench: Shri S. Rifaur Rahman, Hon'Ble & Shri Sandeep Singh Karhail, Hon'Bledcit – Central Circle – 8(1) V. M/S. Raymond Apparel Limited Room No. 656, 6Th Floor New Glass Building Aayakar Bhavan, M.K. Road Pokhran Road No. 1 Mumbai - 400020 Jekegram, Thane – 400606 Pan: Aakcs3399H (Appellant) (Respondent) Assessee By : Shri Madhur Agrawal Department By : Shri T. Shankar

For Appellant: Shri Madhur AgrawalFor Respondent: Shri T. Shankar
Section 132Section 143(2)Section 14ASection 153C

respectively. It clearly shows that the total investments made are less than the average own funds available in the business. Therefore, the disallowance of interest expenditure proposed for this year is not as per the judicial precedents. Respectfully following the decision of Hon'ble Apex Court in the case ... interest borrowing funds for making the various investments. Therefore, the Assessing Officer cannot invoke Rule 8D(2)(ii) of I.T. Rules to disallow the interest expenditure u/s. 14A of the Act. 25. This bench is consistently holding that, the disallowance u/s. 14A of the Act if any shall be restricted

ACIT -893) (1), Mumbai vs. M/S. Triple Securities Pvt. Ltd, Mumbai

ITA 2270/MUM/2021[2016-17]Status: DisposedITAT Mumbai20 Dec 2022AY 2016-17
For Appellant: Shri Nitesh JoshiFor Respondent: Ms. Samruddhi Hande
Section 143(3)Section 36Section 43C

vide Assessment Order, dated 30.12.2018, after making the addition of INR 2,18,84,138/- under Section 43CA of the Act and disallowance of interest expenditure of INR 1,55,42,291/-. 4. Being aggrieved, the Assessee preferred appeal before CIT(A). The CIT(A) granted relief to the Assessee

M/S Mega Management Services Pvt Ltd., Mumbai vs. DCIT CC 6 (4), Mumbai

In the result, appeal by the assessee is partly allowed

ITA 7811/MUM/2019[2013-14]Status: DisposedITAT Mumbai16 Dec 2022AY 2013-14

Bench: Shri Vikas Awasthy & Shri Amarjit Singhआअसं. 7811/मुं/2019 ("न.व. 2013-14) M/S. Mega Management Services P. Ltd. 301 Level-3, Ceejay House F Block Shiv Sagar Estate, Dr. Annie Besant Worli, Mumbai 400018 ...... अपीलाथ"/Appellant Pan: Aaacm4143K बनाम Vs. Dcit, Central Circle 6(4) Room No. 209, 2Nd Floor Aayakar Bhavan, M.K. Road ..... ""तवाद"/Respondent Mumbai 400020 अपीलाथ" "वारा/ Appellant By : Shri Piyush Chhajed ""तवाद" "वारा/Respondent By : Dr. Samuel Pitta

For Appellant: Shri Piyush ChhajedFor Respondent: Dr. Samuel Pitta
Section 133(1)Section 14ASection 36(1)(iii)Section 37Section 37(1)Section 68

assessee in the appeal has raised eight grounds, the gist of the grounds of appeal is as under: - 2 Ground No. 1: Disallowance of interest expenditure Rs.1,90,46,940/- u/s. 36(1)(iii) of the Income Tax Act, 1961 (hereinafter “the Act”); Ground No. 2: Disallowance of expenditure ... made by rival sides and have examined the orders of the authorities below. In ground No. 1 of appeal, the assessee has assailed disallowance of interest expenditure u/s. 36(1)(iii) of the Act. The contention of the assessee is that the interest has been paid to holding company

M/S. Jk Investors (Bombay ) Ltd, Mumbai vs. DCIT Cent. Cir-8(1), Mumbai

In the result, the present appeal is allowed for statistical purposes

ITA 2115/MUM/2021[2011-12]Status: DisposedITAT Mumbai14 Dec 2022AY 2011-12
For Appellant: Shri Madhur AggarwalFor Respondent: Shri Achal Sharma
Section 143(3)Section 14ASection 153C

excess of investments which have yielded exempt income. The ITA. No. 2115/Mum/2021 Assessment Year: 2011-12 appellant further submits that the suo-moto disallowance of interest expenditure should also be deleted. Ground No.2 (Original Ground) Without prejudice to Ground 1 above, on the facts and circumstances of the case

Anitha Amarnath, Chennai vs. ACIT, Ncc-1, Chennai

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

ITA 3171/CHNY/2018[2015-16]Status: DisposedITAT Chennai07 Dec 2022AY 2015-16

Bench: Shri Mahavir Singhand Shri Manoj Kumar Aggarwal

For Appellant: Shri K. Ravi, AdvocateFor Respondent: Shri P. Sajit Kumar, JCIT
Section 143(3)Section 36(1)(iii)

assessee. For this, assessee has raised the following ground No.2:- “2. The Commissioner of Income Tax (Appeals) erred in sustaining the disallowance of interest expenditure of Rs.60,86,345/- without giving adequate opportunity to the appellant to substantiate that the capital borrowed were for the purpose of business.” 4. Brief

DCIT CC-6(4), Mumbai vs. M/S Landmark Realty, Mumbai

In the result, both the appeals filed by the Revenue are dismissed

ITA 3954/MUM/2019[2012-13]Status: DisposedITAT Mumbai07 Dec 2022AY 2012-13
Section 131Section 133(6)Section 133ASection 143(3)Section 68

deleting the additions made by the Assessing Officer under section 68 of the I.T. Act and also in deleting the disallowance of interest expenditure claimed on the above said loans. 2. Facts relating to the above said issues are stated in brief. The assessee is a builder and developer

DCIT CC-6(4), Mumbai vs. M/S Landmark Realty, Mumbai

In the result, both the appeals filed by the Revenue are dismissed

ITA 3953/MUM/2019[2011-12]Status: DisposedITAT Mumbai07 Dec 2022AY 2011-12
Section 131Section 133(6)Section 133ASection 143(3)Section 68

deleting the additions made by the Assessing Officer under section 68 of the I.T. Act and also in deleting the disallowance of interest expenditure claimed on the above said loans. 2. Facts relating to the above said issues are stated in brief. The assessee is a builder and developer

Shri Prakash Shah, Mumbai vs. Dy CIT-Circle-20(2), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 904/MUM/2021[2012-13]Status: DisposedITAT Mumbai06 Dec 2022AY 2012-13
Section 36(1)(iii)

Pravarsh Impex Pvt. Ltd. at Rs. 1.53 crores. Since the assessee has received interest of Rs. 1.38 crores only, the Assessing Officer disallowed the interest expenditure to the extent of Rs. 14.77 lakhs under section 36(1)(iii) of the Act. 6. Before the learned CIT(A), the assessee contended ... failed to show that the loan was given to the above said concern from out of own funds. Accordingly, he confirmed the disallowance of interest expenditure. 7. We heard learned DR on this issue and perused the record. We noticed from the assessment order that the Assessing Officer has followed

Deputy Commissioner of Income Tax, Central Circle-2(4), Bangalore vs. Century Real Estate Holdings Private Limited, Bangalore

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

ITA 740/BANG/2022[2013-14]Status: DisposedITAT Bangalore30 Nov 2022AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2013-14

For Appellant: Smt. Sheetal Borkar, A.RFor Respondent: Shri Gudimella V.P. Pavan Kumar, D.R

made out of common pool of funds and non- interest bearing funds were more than the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made. 42. In the light of above said decisions, we are of the view that disallowance of interest expenses

Vaishnavi Infrastructure Private Limited, Bangalore vs. The Assistant Commissioner of Income Tax, Central Circle-1(2), Bangalore

In the result, all the three appeals filed by the assessee stands allowed for statistical purposes

ITA 728/BANG/2022[2011-12]Status: DisposedITAT Bangalore30 Nov 2022AY 2011-12

Bench: Smt. Beena Pillai & Ms. Padmavathy S

For Appellant: Smt. Suman Lunkar, CA
Section 132Section 143(2)Section 143(3)Section 14ASection 153A

investments are made out of common pool of funds and non-interest bearing funds were morethan the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made. 42. In the light of above said decisions, we are of the view that disallowance of interest expenses ... profit, share capital and reserves and surplus was much more than investments made by assessee which could yield tax-free income, no disallowance of interest expenditure under section 14A could be made [In favour of assesse] Where the availability of profit, share capital and reserves and surplus was much more

Vaishnavi Infrastructure Private Limited, Bangalore vs. The Assistant Commissioner of Income Tax, Central Circle-1(2), Bangalore

In the result, all the three appeals filed by the assessee stands allowed for statistical purposes

ITA 727/BANG/2022[2009-10]Status: DisposedITAT Bangalore30 Nov 2022AY 2009-10

Bench: Smt. Beena Pillai & Ms. Padmavathy S

For Appellant: Smt. Suman Lunkar, CA
Section 132Section 143(2)Section 143(3)Section 14ASection 153A

investments are made out of common pool of funds and non-interest bearing funds were morethan the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made. 42. In the light of above said decisions, we are of the view that disallowance of interest expenses ... profit, share capital and reserves and surplus was much more than investments made by assessee which could yield tax-free income, no disallowance of interest expenditure under section 14A could be made [In favour of assesse] Where the availability of profit, share capital and reserves and surplus was much more

Vaishnavi Infrastructure Private Limited, Bangalore vs. The Assistant Commissioner of Income Tax, Central Circle-1(2), Bangalore

In the result, all the three appeals filed by the assessee stands allowed for statistical purposes

ITA 695/BANG/2022[2012-13]Status: DisposedITAT Bangalore30 Nov 2022AY 2012-13

Bench: Smt. Beena Pillai & Ms. Padmavathy S

For Appellant: Smt. Suman Lunkar, CA
Section 132Section 143(2)Section 143(3)Section 14ASection 153A

investments are made out of common pool of funds and non-interest bearing funds were morethan the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made. 42. In the light of above said decisions, we are of the view that disallowance of interest expenses ... profit, share capital and reserves and surplus was much more than investments made by assessee which could yield tax-free income, no disallowance of interest expenditure under section 14A could be made [In favour of assesse] Where the availability of profit, share capital and reserves and surplus was much more

Century Real Estate Holdings Private Limited, Bangalore vs. Deputy Commissioner of Income Tax, Central Circle-2(2), Bangalore

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

ITA 580/BANG/2022[2013-14]Status: DisposedITAT Bangalore30 Nov 2022AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2013-14

For Appellant: Smt. Sheetal Borkar, A.RFor Respondent: Shri Gudimella V.P. Pavan Kumar, D.R

made out of common pool of funds and non- interest bearing funds were more than the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made. 42. In the light of above said decisions, we are of the view that disallowance of interest expenses

DCIT, CC 4(3), Central Range-4, Mumbai vs. Kukreja Development Corporation, Mumbai

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

ITA 5766/MUM/2017[2011-12]Status: DisposedITAT Mumbai17 Nov 2022AY 2011-12

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Harsh M. KapadiaFor Respondent: Shri Tejinder Pal Singh
Section 143(3)Section 250Section 263Section 36(1)(iii)Section 43(1)Section 68

case & in law, the Ld CIT(A) erred in deleting the addition of Rs.1,38,19,802/- made by AO on account of disallowance of interest expenditure, without appreciating the that the assessee Kukreja Development Corporation ITA No.5766/Mum./2017 failed to furnish the requisite details called ... Assessing Officer restored.” 3. The issues arising in ground No. 1, raised in Revenue’s appeal, is pertaining to the deletion of disallowance of interest expenditure. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the business

Macrotech Developers Ltd.(Successor to Lodha Impression Real Estate P. Ltd.), Mumbai vs. Dy CIT Central Range-7(3), Mumbai

In the result, appeal by the assessee is allowed

ITA 527/MUM/2021[2016-17]Status: DisposedITAT Mumbai09 Nov 2022AY 2016-17

Bench: Shri G. S. Pannu & Shri Vikas Awasthyआअसं. 527/मुं/2021 (िन.व. 2016-17) Macrotech Developers Ltd. (Successor To Lodha Impression Real Estate Private Limited,) 412, Floor -4, 17G Vardhaman Chamber, Cawasji Patel Road,Horniman Circle. Fort, Mumbai – 400 001 Pan: Aaacl-1490-J ...... अपीलाथ" /Appellant बनाम Vs. Dcit, Central Range – 7(3), Room No.655, 6Th Floor, Aaykar Bhavan, M.K.Road, Mumbai 400 020. ..... "ितवादी/Respondent अपीलाथ" "ारा/ Appellant By : Shri Neeraj Seth "ितवादी "ारा/Respondent By : Dr. Mahesh Akhade सुनवाई की ितिथ/ Date Of Hearing : 11/08/2022 घोषणा की ितिथ/ Date Of Pronouncement : 09/11/2022 आदेश/ Order

For Appellant: Shri Neeraj SethFor Respondent: Dr. Mahesh Akhade
Section 14ASection 36(1)(iii)

took a different view following the decision of Special Bench in the case of Wall Street Construction Ltd. vs. JACIT(supra). 6. Disallowance of interest expenditure u/s. 36(1)(iii) of the Act is a perennial issue in assessee’s case. It is not in dispute that the assessee after

ITO 28 )(2)(3), Navi Mumbai vs. M/S N G Group, Navi Mumbai

In the result, the appeal of the learned Assessing Officer is dismissed and the appeal of the assessee is partly allowed

ITA 6748/MUM/2019[2011-12]Status: DisposedITAT Mumbai01 Nov 2022AY 2011-12

Bench: Shri Amit Shukla, Jm & Shri Prashant Maharishi, Am M/S Ng Group Ito, 28(2)(3) Plot No.8, Sector 11, Opp R. No. 310, 3 Rd Floor, Juinagar Rly Station, Vashi Rly Station Complex, Vs. Vashi Navi Mumbai Sanpada, Mumbai-400 703 Navi Mumbai–400 709 (Respondent) (Appellant) Pan No. Aaffn9159E M/S Ng Group Ito, 28(2)(3) Plot No.8, Sector 11, Opp R. No. 310, 3 Rd Floor, Juinagar Rly Station, Vashi Rly Station Complex, Vs. Sanpada, Vashi Navi Mumbai Mumbai-400 703 Navi Mumbai–400 709 (Respondent) (Appellant) Pan No. Aaffn9159E Assessee By : Ms. Nishita Mandalaywala, Ar Revenue By : Dr. Mahesh Akhade, Cit Dr Date Of Hearing: 04.08.2022 Date Of Pronouncement: 01.11.2022

For Appellant: Ms. Nishita Mandalaywala, ARFor Respondent: Dr. Mahesh Akhade, CIT DR
Section 36(1)(ii)Section 41(1)Section 68

addition of ₹2,24,00,000/- was deleted and addition of ₹1 crore was confirmed. The learned CIT (A) deleted the disallowance of interest expenditure of ₹25,13,558/- and also addition under Section 41(1) of the Act of ₹13,41,108/-. With respect to the bogus purchases

Ashwin S. Mehta, Mumbai vs. DCIT Cen Cir 4(1), Mumbai

In the result, both the appeals filed by the assessee for the A

ITA 2735/MUM/2017[2013-14]Status: DisposedITAT Mumbai28 Oct 2022AY 2013-14

Bench: Shri Amit Shukla, Hon'Ble & Shri S. Rifaur Rahman, Hon'Bleashwin S. Mehta V. Dcit – Central Circle – 23 32, Madhuli, Dr. A.B. Road [Now Dcit, Cc-4(1)] Worli, Mumbai – 400018 4Th Floor, Aayakar Bhavan M.K. Road, Mumbai - 400020 Pan: Abapm2121M (Appellant) (Respondent)

Section 10(34)Section 142(1)Section 143(2)Section 148Section 14A

dated 27.03.2014. 2. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming disallowance of interest expenditure amounting to Rs. 12,66,78,687/-. 3. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the estimated addition ... behalf of the assessee submitted that assessee is not pressing ground no. 1. With regard to ground no. 2 on account of disallowance of interest expenditure, Ld. AR brought to our notice para 5 to 5.8 of AO’s order and para