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“Section 36(1)(iii)”

Section References (mined)Section 36Section 36(1)(iii)1,547 judgments

The decision most relied on for Section 36(1)(iii) is CIT v. Reliance Utilities & Power Ltd. (313 ITR 340), cited in 2,118 judgments on BharatTax.

Leading authorities on Section 36(1)(iii)

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.

S.A. Builders Ltd. v. CIT
288 ITR 1 · 2007 · Supreme Court
1,484
citing judgments

Interest paid on borrowed funds cannot be disallowed merely because the assessee made interest-free advances, provided those advances were made for business purposes and commercial expediency. The Revenue cannot dictate a businessman's commercial decisions, but the assessee bears the onus to prove the business expediency.

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.

Maxopp Investment Ltd. v. CIT
347 ITR 272 · 2012 · High Court
516
citing judgments

Disallowance under Section 14A cannot exceed the exempt income earned. The Assessing Officer must record satisfaction regarding the assessee's accounts before making any disallowance.

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.

Judgments citing Section 36(1)(iii)

Idea Cellular Ltd., Mumbai vs. DCIT - 14(2)(1), Mumbai

In the result, the ground no

ITA 1775/MUM/2018[2011-12]Status: DisposedITAT Mumbai24 Jul 2025AY 2011-12

Bench: Ms. Kavitha Rajagopal, Jm & Smt. Renu Jauhri, Am

Section 194Section 250Section 40Section 9(1)(vi)

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SMT. RENU JAUHRI, AM ITA

DCIT - 14(2)(1), Mumbai vs. Idea Cellular Ltd., Mumbai

In the result, the ground no

ITA 5945/MUM/2017[2012-13]Status: DisposedITAT Mumbai24 Jul 2025AY 2012-13

Bench: Ms. Kavitha Rajagopal, Jm & Smt. Renu Jauhri, Am

Section 194Section 250Section 40Section 9(1)(vi)

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SMT. RENU JAUHRI, AM ITA

DCIT, C-1(1), Chandigarh vs. M/S Rana Polycot Ltd., Chandigarh

In the result, all the appeals are dismissed

ITA 1050/CHANDI/2018[2009-10]Status: DisposedITAT Chandigarh23 Jul 2025AY 2009-10

Bench: Shri Rajpal Yadav & Shri Manoj Kumar Aggarwalआयकर अपील सं./ Ita No. 1050/Chd/2018 &

For Appellant: Shri Parikshit Aggarwal, CA and Ms. Shruti Khandelwal, AdvocateFor Respondent: Shri Sarabjeet Singh, CIT, DR
Section 36(1)(iii)

Rs.4,43,94,826/- and Rs.5,99,57,626/-. These disallowances have been made by the AO with the aid of Section 36(1)(iii) of the Act on the ground that assessee has made advances out of interest bearing funds for non-business purposes, hence interest expenditure ... cases whose appeals are still pending in the Tribunal. 4. We have duly considered the rival contentions and gone through the record carefully. Section 36(1)(iii) of the Act has a direct bearing, therefore, it is imperative upon us to take note of relevant part of this Section, which

DCIT, C-1(1), Chandigarh vs. M/S Rana Polycot Ltd., Chandigarh

In the result, all the appeals are dismissed

ITA 1015/CHANDI/2018[2012-13]Status: DisposedITAT Chandigarh23 Jul 2025AY 2012-13

Bench: Shri Rajpal Yadav & Shri Manoj Kumar Aggarwalआयकर अपील सं./ Ita No. 1050/Chd/2018 &

For Appellant: Shri Parikshit Aggarwal, CA and Ms. Shruti Khandelwal, AdvocateFor Respondent: Shri Sarabjeet Singh, CIT, DR
Section 36(1)(iii)

Rs.4,43,94,826/- and Rs.5,99,57,626/-. These disallowances have been made by the AO with the aid of Section 36(1)(iii) of the Act on the ground that assessee has made advances out of interest bearing funds for non-business purposes, hence interest expenditure ... cases whose appeals are still pending in the Tribunal. 4. We have duly considered the rival contentions and gone through the record carefully. Section 36(1)(iii) of the Act has a direct bearing, therefore, it is imperative upon us to take note of relevant part of this Section, which

DCIT, C-1(1), Chandigarh vs. M/S Rana Polycot Ltd., Chandigarh

In the result, all the appeals are dismissed

ITA 1014/CHANDI/2018[2011-12]Status: DisposedITAT Chandigarh23 Jul 2025AY 2011-12

Bench: Shri Rajpal Yadav & Shri Manoj Kumar Aggarwalआयकर अपील सं./ Ita No. 1050/Chd/2018 &

For Appellant: Shri Parikshit Aggarwal, CA and Ms. Shruti Khandelwal, AdvocateFor Respondent: Shri Sarabjeet Singh, CIT, DR
Section 36(1)(iii)

Rs.4,43,94,826/- and Rs.5,99,57,626/-. These disallowances have been made by the AO with the aid of Section 36(1)(iii) of the Act on the ground that assessee has made advances out of interest bearing funds for non-business purposes, hence interest expenditure ... cases whose appeals are still pending in the Tribunal. 4. We have duly considered the rival contentions and gone through the record carefully. Section 36(1)(iii) of the Act has a direct bearing, therefore, it is imperative upon us to take note of relevant part of this Section, which

DCIT, C-1(1), Chandigarh vs. M/S Rana Polycot Ltd., Chandigarh

In the result, all the appeals are dismissed

ITA 1013/CHANDI/2018[2010-11]Status: DisposedITAT Chandigarh23 Jul 2025AY 2010-11

Bench: Shri Rajpal Yadav & Shri Manoj Kumar Aggarwalआयकर अपील सं./ Ita No. 1050/Chd/2018 &

For Appellant: Shri Parikshit Aggarwal, CA and Ms. Shruti Khandelwal, AdvocateFor Respondent: Shri Sarabjeet Singh, CIT, DR
Section 36(1)(iii)

Rs.4,43,94,826/- and Rs.5,99,57,626/-. These disallowances have been made by the AO with the aid of Section 36(1)(iii) of the Act on the ground that assessee has made advances out of interest bearing funds for non-business purposes, hence interest expenditure ... cases whose appeals are still pending in the Tribunal. 4. We have duly considered the rival contentions and gone through the record carefully. Section 36(1)(iii) of the Act has a direct bearing, therefore, it is imperative upon us to take note of relevant part of this Section, which

United Bank of India, Kolkata vs. DCIT, Ltu, Circle - 1, Kolkata

In the result, the Revenue’s appeal is dismissed (ITA No

ITA 428/KOL/2018[2013-14]Status: DisposedITAT Kolkata23 Jul 2025AY 2013-14

Bench: the ITAT. The grounds may be extracted for reference:

Section 115JSection 14ASection 15JSection 211Section 250Section 36(1)(viii)

Leena Ramachandran (2010) 235 CTR 512 (Ker.) for the principle that the assessee would be entitled to deduction of interest under section 36(1)(iii) of the Act on borrowed funds utilized for the acquisition of shares, when the shares held as stock-in-trade which arise if the assessee

DCIT/ACIT, Ltu - 1, Kolkata vs. M/S. United Bank of India, Kolkata

In the result, the Revenue’s appeal is dismissed (ITA No

ITA 215/KOL/2018[2013-14]Status: DisposedITAT Kolkata23 Jul 2025AY 2013-14

Bench: the ITAT. The grounds may be extracted for reference:

Section 115JSection 14ASection 15JSection 211Section 250Section 36(1)(viii)

Leena Ramachandran (2010) 235 CTR 512 (Ker.) for the principle that the assessee would be entitled to deduction of interest under section 36(1)(iii) of the Act on borrowed funds utilized for the acquisition of shares, when the shares held as stock-in-trade which arise if the assessee

Nagreeka Foils Ltd., Kolkata vs. D.C.I.T., Circle - 3, Kolkata

In the result, all the three appeals filed by the assessee for AYs

ITA 1930/KOL/2024[2011-2012]Status: DisposedITAT Kolkata22 Jul 2025AY 2011-2012

Bench: Shri Pradip Kumar Choubey & Shri Rakesh Mishra

Section 143(3)Section 14ASection 250Section 36

balance sheet and audited financials, which clearly demonstrate the purpose and usage of such funds. Hence, no disallowance can be made under section 36(1)(iii) as: • The borrowed funds were not utilized for non-business purposes; • Interest expenditure pertains to borrowings used for commercial operations only. 3. Advances Were ... Nagreeka Foils Ltd. In light of the above, it is most respectfully prayed that the disallowance of ₹58,42,413/- made under section 36(1)(iii) be deleted in full, and relief be granted to the assessee.” 11. We have considered the submissions made. The assessee has been able

Nagreeka Foils Ltd., Kolkata vs. D.C.I.T., Circle - 6(3), Kolkata

ITA 1789/KOL/2024[2013-2014]Status: DisposedITAT Kolkata22 Jul 2025AY 2013-2014
Section 115JSection 143(1)Section 143(2)Section 143(3)Section 14ASection 2(24)(x)Section 36Section 40a

I.T.A. Nos.: 1788, 1930 & 1789/KOL/2024 AYs: 2010-11, 2011-12 & 2013-14 Nagreeka Foils Ltd. orders u/s 143(3)/263

Nagreeka Foils Ltd., Kolkata vs. D.C.I.T., Circle - 3(1), Kolkata

In the result, all the three appeals filed by the assessee for AYs

ITA 1788/KOL/2024[2010-2011]Status: DisposedITAT Kolkata22 Jul 2025AY 2010-2011

Bench: Shri Pradip Kumar Choubey & Shri Rakesh Mishra

Section 143(3)Section 14ASection 250Section 36

balance sheet and audited financials, which clearly demonstrate the purpose and usage of such funds. Hence, no disallowance can be made under section 36(1)(iii) as: • The borrowed funds were not utilized for non-business purposes; • Interest expenditure pertains to borrowings used for commercial operations only. 3. Advances Were ... Nagreeka Foils Ltd. In light of the above, it is most respectfully prayed that the disallowance of ₹58,42,413/- made under section 36(1)(iii) be deleted in full, and relief be granted to the assessee.” 11. We have considered the submissions made. The assessee has been able

ACIT-CC-7(3), Mumbai vs. Macrotech Developers Private Limited, Mumbai

In the result, the sole ground of appeal raised by

ITA 1486/MUM/2025[2013-14]Status: DisposedITAT Mumbai21 Jul 2025AY 2013-14

Bench: Shri Pawan Singh & Shri Prabhash Shankar

Section 254(1)Section 36(1)(iii)Section 36(1)(vii)Section 36(2)Section 43B

jurisdictional High Court in the case of Lokhandwala Construction India Pvt Ltd.260 ITR 579 which was rendered before the proviso to Section 36(1)(iii) of the Act.? 8. Whether on the facts and circumstances of the case and in law, the learned CIT(A) is justified in deleting ... year which was incurred. The assessee also submitted that such interest cost has been claimed as deduction and the same is allowed under section 36(1)(iii) as interest pertaining to stock in trade of assessee. The assessee also relied on the decision of Hon'ble Apex Court in Taparia

Macrotech Developers Limited (Mdl), Mumbai vs. Deputy Commissioner of Income Tax Central Circle 7(3), Mumbai

In the result, the sole ground of appeal raised by

ITA 1272/MUM/2025[2013-14]Status: DisposedITAT Mumbai21 Jul 2025AY 2013-14

Bench: Shri Pawan Singh & Shri Prabhash Shankar(Physical Hearing) Macrotech Developers Limited (Mdl) Dcit, Central Range – 7(3), Room No. 655, 6Th Floor, 412, Floor-4, 17G Vardhaman Chamber, Vs Cawasji Patel Road, Horniman Circle, Aayakar Bhavan, Maharshi Fort, Mumbai – 400001. Karve Road, Mumbai-400020. [Pan No. Aaacl1490J] Appellant / Assessee Respondent / Revenue (Physical Hearing) Acit – Cc – 7(3), Mumbai Macrotech Developers Private Limited Room No. 655, 6Th Floor, Vs 412, Floor-4, 17G Vardhaman Chamber, Aayakar Bhavan, Maharshi Cawasji Patel Road, Horniman Circle, Fort, Karve Road, Mumbai-400020. Mumbai – 400020. [Pan No. Aaacl1490J] Appellant / Assessee Respondent / Revenue

Section 254(1)Section 36(1)(iii)Section 36(1)(vii)Section 36(2)Section 43B

jurisdictional High Court in the case of Lokhandwala Construction India Pvt Ltd.260 ITR 579 which was rendered before the proviso to Section 36(1)(iii) of the Act.? 8. Whether on the facts and circumstances of the case and in law, the learned CIT(A) is justified in deleting ... year which was incurred. The assessee also submitted that such interest cost has been claimed as deduction and the same is allowed under section 36(1)(iii) as interest pertaining to stock in trade of assessee. The assessee also relied on the decision of Hon’ble Apex Court in Taparia

Maithri Laboratories Private Limited, Hyderabad vs. ACIT., Central Circle-2(4), Hyderabad

In the result, the appeal of the assessee is allowed

ITA 291/HYD/2025[2021-22]Status: DisposedITAT Hyderabad18 Jul 2025AY 2021-22

Bench: Shri Ravish Sood & Shri Madhusudan Sawdia

For Appellant: Shri M.V. Prasad, C.AFor Respondent: Shri Gurpreet Singh, SR-DR
Section 132Section 143(2)Section 143(3)Section 153ASection 36(1)(iii)Section 50(1)Section 50(3)

second issue is concerned, the Ld. AR submitted that the disallowance of Rs.73,02,428/- made by the Ld. AO under Section 36(1)(iii) of the Act is wholly unjustified. He submitted that, the advances in question were made out of the assessee’s own surplus interest-free funds ... interest-free funds were significantly more than the advances, and accordingly, no ITA Nos.288 to 291/Hyd/2025 9 disallowance could be made under Section 36(1)(iii) of the Act. The Ld. AR relied upon the judgment of the Hon’ble Supreme Court in the case of CIT v. Reliance Industries

Msn Life Sciences Private Limited, Hyderabad vs. ACIT., Central Circle-2(4), Hyderabad

In the result, the appeal of the assessee is allowed

ITA 290/HYD/2025[2021-22]Status: DisposedITAT Hyderabad18 Jul 2025AY 2021-22

Bench: Shri Ravish Sood & Shri Madhusudan Sawdia

For Appellant: Shri M.V. Prasad, C.AFor Respondent: Shri Gurpreet Singh, SR-DR
Section 132Section 143(2)Section 143(3)Section 153ASection 36(1)(iii)Section 50(1)Section 50(3)

second issue is concerned, the Ld. AR submitted that the disallowance of Rs.73,02,428/- made by the Ld. AO under Section 36(1)(iii) of the Act is wholly unjustified. He submitted that, the advances in question were made out of the assessee’s own surplus interest-free funds ... interest-free funds were significantly more than the advances, and accordingly, no ITA Nos.288 to 291/Hyd/2025 9 disallowance could be made under Section 36(1)(iii) of the Act. The Ld. AR relied upon the judgment of the Hon’ble Supreme Court in the case of CIT v. Reliance Industries

Msn Organics Private Limited, Hyderabad vs. ACIT., Central Circle-2(4), Hyderabad

In the result, the appeal of the assessee is allowed

ITA 289/HYD/2025[2021-22]Status: DisposedITAT Hyderabad18 Jul 2025AY 2021-22

Bench: Shri Ravish Sood & Shri Madhusudan Sawdia

For Appellant: Shri M.V. Prasad, C.AFor Respondent: Shri Gurpreet Singh, SR-DR
Section 132Section 143(2)Section 143(3)Section 153ASection 36(1)(iii)Section 50(1)Section 50(3)

second issue is concerned, the Ld. AR submitted that the disallowance of Rs.73,02,428/- made by the Ld. AO under Section 36(1)(iii) of the Act is wholly unjustified. He submitted that, the advances in question were made out of the assessee’s own surplus interest-free funds ... interest-free funds were significantly more than the advances, and accordingly, no ITA Nos.288 to 291/Hyd/2025 9 disallowance could be made under Section 36(1)(iii) of the Act. The Ld. AR relied upon the judgment of the Hon’ble Supreme Court in the case of CIT v. Reliance Industries

Msn Pharmachem Private Limited, Hyderabad vs. ACIT., Central Circle-2(4), Hyderabad

In the result, the appeal of the assessee is allowed

ITA 288/HYD/2025[2021-22]Status: DisposedITAT Hyderabad18 Jul 2025AY 2021-22

Bench: Shri Ravish Sood & Shri Madhusudan Sawdia

For Appellant: Shri M.V. Prasad, C.AFor Respondent: Shri Gurpreet Singh, SR-DR
Section 132Section 143(2)Section 143(3)Section 153ASection 36(1)(iii)Section 50(1)Section 50(3)

second issue is concerned, the Ld. AR submitted that the disallowance of Rs.73,02,428/- made by the Ld. AO under Section 36(1)(iii) of the Act is wholly unjustified. He submitted that, the advances in question were made out of the assessee’s own surplus interest-free funds ... interest-free funds were significantly more than the advances, and accordingly, no ITA Nos.288 to 291/Hyd/2025 9 disallowance could be made under Section 36(1)(iii) of the Act. The Ld. AR relied upon the judgment of the Hon’ble Supreme Court in the case of CIT v. Reliance Industries

M/S. Green Earth Biogas Pvt. Ltd., Surendranagar vs. The Pr. CIT-3, Ahmedabad

ITA 185/RJT/2023[2017-18]Status: DisposedITAT Rajkot17 Jul 2025AY 2017-18

Bench: Dr. Arjun Lal Saini & Shri Dinesh Mohan Sinhaआयकर अपीलसं./Ita No.185/Rjt/2023

For Appellant: Shri Hardik Vora, Ld. A.RFor Respondent: Shri Sanjay Pungalia, Ld. Sr. DR
Section 263

Disallowance of amortization expenses of Rs.70,71,825/-, claimed, treating the same to be capital expenditure, in view of the provision of section 36(1)(iii) of the Act, read with explanation 8 to section 43(1) of the Act. With regard to the disallowance of Rs.31,000/- u/s.40A ... under- reporting of income to the extent of Rs.70,71,531/-, which was prima facie not allowable in view of the provisions of Section 36(1)(iii) r.w Explanation 8 to Section 43(1) of the Act. The dropping of penalty in respect of amortization expenses has resulted into loss

Atharva Foundries Private Limited, Pune vs. Assistant Comissioner of Income Tax, Circle 1(1), Pune

In the result, the appeal of the assessee is allowed

ITA 113/PUN/2025[2016-17]Status: DisposedITAT Pune17 Jul 2025AY 2016-17

Bench: Shri R.K. Panda & Ms. Astha Chandra

For Appellant: Shri R.C. DoshiFor Respondent: Shri Ramnath P. Murkunde
Section 10(34)Section 143(1)Section 143(2)Section 143(3)Section 14ASection 36(1)(iii)Section 37

penal interest paid by the assessee is an allowable expense u/s 36(1)(iii) of the Act. There is no provision in section 36(1)(iii) of the Act disallowing any interest on money borrowed for working capital purpose. He also raised an alternate contention that the penal interest paid ... Addl./JCIT(A) has confirmed the addition/disallowance made by the Ld. AO for the reasons stated in the preceding paragraphs. 8.1 Section 36(1)(iii) of the Act reads as under : 36(1). The deductions provided for in the following clauses shall be allowed in respect of the matters dealt

Income Tax Officer 5(3)(1), Mumbai vs. Verve Industries Private Limited, Mumbai

Appeal are allowed

ITA 2479/MUM/2025[2021-22]Status: DisposedITAT Mumbai17 Jul 2025AY 2021-22

Bench: Shri Om Prakash Kant () & Ms. Kavitha Rajagopal () Assessment Year: 2021-22 Ito 5(3)(1), Verve Industries Pvt. Ltd., 526, Aayakar Bhavan, M.K Road, Plot No. 16, Office No. 1, Ground Vs. Mumbai-400020. Floor Aman Chamber 2, Mama Permanand Marg, Opera House, Mumbai-400 004. Pan No. Aahcv 1577 H Appellant Respondent

For Appellant: Mr. Mehul TaleraFor Respondent: 09/07/2025
Section 133(6)Section 68

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