“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)

M/S.Wellknown Textile Industries Private Limited, Mumbai vs. Deputy Commissioner of Income Tax, Circle 4(3)1, Mumbai

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

ITA 8705/MUM/2025[2022-23]Status: DisposedITAT Mumbai20 Feb 2026AY 2022-23

Bench: Smt. Beena Pillai () & Shri Girish Agrawal ()

Section 14ASection 36(1)(iii)

IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) & SHRI GIRISH AGRAWAL (ACCOUNTANT MEMBER

DCIT 2(3)(1), Mumbai vs. Tata Steel Ltd, Mumbai

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

ITA 3555/MUM/2016[2008-09]Status: DisposedITAT Mumbai20 Feb 2026AY 2008-09

For Appellant: Shri J.D. Mistri, Sr. Advocate and Ms. Jasmin Amalsadvala, AdvocateFor Respondent: Shri Ajay Chandra, CIT DR

Section 143(3)Section 144Section 147Section 148Section 151Section 36(1)(iii)Section 57

Kingdom, as and by way of extension of the Appellant's existing steel business and hence claimed by the Appellant as deductible under Section 36(1)(iii). 2.1 Without prejudice to the foregoing ground, the Interest amounting to₹ 518,75,84,534 ought to have been allowed under Section ... assessee is that interest expenditure incurred by it is for the purpose of business and hence, allowable expenditure within the meaning of section 36(1)(iii). Facts relating to financing structure as detailed above and the investment made by the assessee including that AY 2008-09 by the step down

Tata Steel Ltd, Mumbai vs. Asst CIT 2(3), Mumbai

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

ITA 3294/MUM/2016[2008-09]Status: DisposedITAT Mumbai20 Feb 2026AY 2008-09

For Appellant: Shri J.D. Mistri, Sr. Advocate and Ms. Jasmin Amalsadvala, AdvocateFor Respondent: Shri Ajay Chandra, CIT DR

Section 143(3)Section 144Section 147Section 148Section 151Section 36(1)(iii)Section 57

Income Tax Officer, Chennai vs. Avigna Private Limited, Chennai

In the result, the appeal of the revenue is allowed for statistical purposes

ITA 2930/CHNY/2025[2023-24]Status: DisposedITAT Chennai13 Feb 2026AY 2023-24

Bench: Shri Aby T. Varkey & Ms. Padmavathy.Sआयकर अपील सं./Ita No.2930/Chny/2025 िनधा$रण वष$ /Assessment Year: 2023-24

For Appellant: Mr. M. Karunakaran, AdvocateFor Respondent: Ms. R. Anitha, Addl. CIT

Section 250Section 36(1)(iii)Section 40

exclusive use and purpose of the facilitating appellant holding Avigna Pvt. Ltd. :- 4 -: company’s core business activity is an admissible deduction under section 36(1)(iii) of the Income Tax Act. Once the interest fee advances given to subsidiary for the purpose of appellant business out of borrowed funds

JCIT(OSD)-14(1)(1), Mumbai vs. Kukreja Builders Pvt. Ltd., Mumbai

In the result, the revenue’s appeal is partly allowed in the above terms

ITA 2102/MUM/2025[2013-14]Status: DisposedITAT Mumbai13 Feb 2026AY 2013-14

Bench: Shri Narender Kumar Choudhry & Shri Prabhash Shankarassessment Year: 2013-14 Dcit – 14(1)(1), Mumbai M/S. Kukreja Builders Room No. 432, 4Th Floor, Pvt. Ltd. Aayakarbhavan, M.K. Road, 4 & 5Th Floor, Sai Mumbai - 400020 Commercial Building, Bks Vs. Devshi Marg., Govandi (E), Mumbai, Maharashtra– 400088 Pan: Aacck5040M (Appellant) (Respondent) Present For: Assessee By : Shri Ajay Singh & Shri Akshay Pawar, Ld. A.R. Revenue By : Shri Hemanshu Joshi, (Sr. D.R.) Date Of Hearing : 12.12.2025 Date Of Pronouncement : 13.02.2026 O R D E R Per : Narender Kumar Choudhry: This Appeal Has Been Preferred By The Assessee Against The Order Dated 25.01.2025, Impugned Herein, Passed By The National Faceless Appeal Centre (Nfac)/Ld. Commissioner Of Income Tax (Appeals) (In Short Ld. Commissioner) U/S 250 Of The Income Tax Act, 1961 (In Short ‘The Act’) For The A.Y. 2013-14. 2. In The Instant Case, The Assessee During The A.Y. Under Consideration Had Declared Its Total Income As Rs. 2,20,00,580/- By Filing Its Return Of Income, Which Was Initially Processed Under Section 143 Of The Act. 2 M/S. Kukreja Builders Pvt. Ltd.

For Appellant: Shri Ajay Singh & Shri AkshayFor Respondent: Shri Hemanshu Joshi, (SR. D.R.)

Section 131Section 133(6)Section 143Section 250Section 68

advances amounting to Rs.5,79,93,815/-, in total, disallowed the amount of Rs.86,99,072/- out of such interest expenses under Section 36(1) (iii) of the Act and added back to the income of the Assessee. The Ld. Commissioner ultimately deleted such addition of Rs.86 ... utilized for business purpose, then authorities are right in rejecting assessee's claim for deduction of interest on borrowed capital under section 36(1)(iii).” 25. Ground No. 1 pertains to the deletion of the addition made under Section 68 of the Act, on the basis of details/clarification/evidences filed

Aura Securities Private Limited, Ahmedabad vs. NFAC, Delhi Present Jurisdiction the DCIT, Circle-1(1)(1), Ahmedabad

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

ITA 1725/AHD/2024[2018-19]Status: DisposedITAT Ahmedabad12 Feb 2026AY 2018-19

Bench: Shri Tr Senthil Kumar & Shri Narendra Prasad Sinhaassessment Years: 2018-19

Section 143(3)Section 14ASection 36

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SHRI TR SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD

Deputy Commissioner of Income Tax, Circle-2 1 1, Vadodara vs. Gujarat Insecticides Limited, Ankleshwar

ITA 2678/AHD/2025[2014-15]Status: DisposedITAT Ahmedabad11 Feb 2026AY 2014-15

Section 143(3)Section 271(1)(c)Section 36(1)(iii)Section 40A(2)(b)

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil

Deputy Commissioner of Income Tax, Circle-2 1 1, Vadodara vs. Gujarat Insecticides Limited, Ankleshwar

ITA 2677/AHD/2025[2013-14]Status: DisposedITAT Ahmedabad11 Feb 2026AY 2013-14

Bench: DR. BRR Kumar (Vice President), Shri T. R. Senthil Kumar (Judicial Member)

Section 143(3)Section 271(1)(c)Section 36(1)(iii)Section 40A(2)(b)

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil

Asst. Commissioner of Income Tax, Central Circle-3(2), Hyderabad vs. Il & Fs Engineering & Constructions Co. Limited, Hyderabad

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

ITA 129/HYD/2020[2008-09]Status: DisposedITAT Hyderabad11 Feb 2026AY 2008-09

Bench: Releasing The Contract Charges To The Account Of The Assessee.

Section 194ASection 194CSection 37Section 40Section 40A(3)Section 4OSection 69C

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “B” Bench, Hyderabad aft fase Wet Ua, Aretetres soreaer Ud at Aopene oh

Il & Fs Engineering and Construction Company Limited(Formerly Maytas Infra Limited), Hyderabad vs. Dy. Commissioner of Income Tax, Central Circle-9, Hyderabad

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

ITA 1886/HYD/2019[2008-09]Status: DisposedITAT Hyderabad11 Feb 2026AY 2008-09

Bench: Releasing The Contract Charges To The Account Of The Assessee.

Section 194ASection 194CSection 37Section 40Section 40A(3)Section 4OSection 69C

IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad “B” Bench, Hyderabad aft fase Wet Ua, Aretetres soreaer Ud at Aopene oh

Rohan Landscape Private Limited, Mumbai vs. The Principle Commissioner of Income Tax, Mumbai

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

ITA 3635/MUM/2025[2020-21]Status: DisposedITAT Mumbai10 Feb 2026AY 2020-21

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI ARUN KHODPIA (Accountant Member)

Section 139(1)Section 142(1)Section 143(2)Section 263Section 3

Rohan Landscape Private Limited only post-completion interest was claimed as revenue expenditure. It was emphasised that this treatment was in accordance with section 36(1)(iii) and accepted accounting principles. On other expenses and business expenditure, the assessee reiterated that these were revenue in nature and incurred wholly ... claimed as revenue expenditure. Interest on inter-corporate deposits was suo motu disallowed. This treatment is in consonance with section 36(1)(iii) and settled accounting principles. The learned Principal Commissioner has not identified any factual error in this treatment nor demonstrated that the Assessing Officer’s view is contrary

Rituraj Steel Private Limited, Bilaspur vs. Assistant Commissioner of Income Tax Circle 2(1), Bilaspur

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

ITA 697/RPR/2025[2017-18]Status: DisposedITAT Raipur09 Feb 2026AY 2017-18

Bench: Shri Partha Sarathi Chaudhury, Jm & Shri Avdhesh Kumar Mishra, Am आयकर अपील सं. / Ita No: 697/Rpr/2025 (िनधा"रण वष" Assessment Year: 2017-18) Rituraj Steel Private Limited, M/S Vs Assistant Commissioner Of Income Rituraj Steel Private Limited, Hotel Tax, Circle 2(1), Bilaspur, East Park Agrasen Chowk, Shri Ram Plaza Vapar Vihar, Bilaspur, Chhattisgarh, 495001 Bilaspur, Chhattisgarh, 495001 Pan: Aaccr7589J (अपीलाथ"/Appellant) : (""थ" / Respondent) िनधा"रती की ओर से / Assessee By : None (Petition Filed) राज" की ओर से / Revenue By : Dr. Priyanka Patel, Sr. Dr सुनवाई की तारीख / Date Of Hearing : 05/02/2026 घोषणा की तारीख / Date Of : 09/02/2026 Pronouncement आदेश / O R D E R Per Avdhesh Kumar Mishra, Am: This Appeal For Assessment Year (‘Ay’) 2017-18 Filed By The Assessee Is Directed Against The Order Dated 29.10.2025 Of The Additional Commissioner Of Income Tax (Appeals), Mysore [‘Addl. Cit(A)’] Passed Under Section 250 Of The Income Tax Act, 1961 (‘Act’).

For Appellant: None (Petition filed)For Respondent: Dr. Priyanka Patel, Sr. DR

Section 250Section 36(1)(iii)

sole effective issue raised by the appellant assessee is in respect of the disallowance of Rs.1,87,000/- made under section 36(1)(iii) of the Act, which reads as “the disallowance being unjustified, unwarranted and uncalled for when 1 Rituraj Steel Pvt Ltd. vs. ACIT(A), Bilaspur the paid ... Assessing Officer (‘AO’) made two disallowances: (i) Service Tax Penalty of Rs.14,19,967/- and; (ii) Interest of Rs.1,87,000/- under section 36(1)(iii) of the Act. We have been tasked to decide the issue of disallowance of interest under section 36(1)(iii) of the Act being

Zuari Management Services Ltd., Goa vs. Deputy Commisioner of Income-Tax, Circle - 1, Margao

The appeal of the assessee is partly allowed

ITA 85/PAN/2020[2009-10]Status: DisposedITAT Panaji06 Feb 2026AY 2009-10

Bench: Hon’Ble Shri Pavan Kumar Gadale & Shri G. D. Padmahshali

For Appellant: Mr Salil Kapoor [‘Ld. AR]For Respondent: Mr Senthil Kumar N [‘Ld. DR)

Section 143(1)Section 143(3)Section 246ASection 250Section 253(1)Section 263Section 35DSection 36(1)(iii)Section 37(1)

disallowance. ITAT-Panaji Page 31 of 34 M/s Zuari Management Services Ltd. Vs DCIT ITA No. 085/PAN/2020 AY: 2009-10 36. What section 36(1) (iii) r-w.s. 37(1) of the Act requires is that the expenditure must be laid out or expended wholly and exclusively ... incurred for making or earning income from business. It is the purpose of the expenditure that, is relevant in determining the applicability of section 36(1)(iii) and 37(1) of the Act and that purpose must be making or earning of income, however such purpose may not be promising

Raghu Rama Renewable Energy Limited, Hyderabad vs. ITO., Ward-3(1), Hyderabad

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

ITA 876/HYD/2025[2018-19]Status: DisposedITAT Hyderabad04 Feb 2026AY 2018-19

Bench: SHRI G. MANJUNATHA, HON’BLE (Accountant Member), SHRI RAVISH SOOD, HON’BLE (Judicial Member)

Section 145(2)Section 250

levied penalty under Section 270A of the Act, in respect of additions made by the A.O. towards disallowance of interest expenses under Section 36(1)(iii) of Rs. 14,16,045/- and disallowance of claim of impairment loss in respect of valuation of closing stock of inventory of raw materials

Raghu Rama Renewable Energy Limited, Hyderabad vs. ITO., Ward-3(1), Hyderabad

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

ITA 875/HYD/2025[2018-19]Status: DisposedITAT Hyderabad04 Feb 2026AY 2018-19

Section 145(2)Section 250

ACIT, Circle-2(1)(1), Mumbai vs. M/S Bank of India, Mumbai

ITA 1548/MUM/2023[2018-2019]Status: DisposedITAT Mumbai30 Jan 2026AY 2018-2019

Bench: Shri Vikram Singh Yadavshri Sandeep Singh Karhail

For Appellant: Shri C. NareshFor Respondent: Shri Satya Pal Kumar, CIT (DR)

Section 10Section 14ASection 250Section 32Section 90

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL

ACIT, Circle-2(1)(1), Mumbai vs. M/S Bank of India, Mumbai

In the result, the appeal by the Revenue for the assessment year 2018-

ITA 1547/MUM/2023[2016-2017]Status: DisposedITAT Mumbai30 Jan 2026AY 2016-2017

Bench: Shri Vikram Singh Yadavshri Sandeep Singh Karhailita No.1452/Mum/2023 Assessment Year : 2016-17 Assessment Year : 2018-19

For Appellant: Shri C. NareshFor Respondent: Shri Satya Pal Kumar, CIT (DR)

Section 10Section 14ASection 250Section 32Section 90

perpetual bonds should not be treated as equity and consequently the interest paid on such bonds should be allowed under section 36(1)(iii) of the Act. In response, the assessee submitted that it has issued perpetual debts instruments over the years and as on 31/03/2016, the outstanding balance ... current year and the nature of payments is different from the interest i.e. borrowed for the purpose of business, which is allowable under section 36(1)(iii) of the Act. The AO, vide order, passed under section 143(3) of the Act, disagreed with the submissions of the assessee

Bank of India, Mumbai vs. The National Faceless Assessment Centre, Mumbai

ITA 1452/MUM/2023[2018-19]Status: DisposedITAT Mumbai30 Jan 2026AY 2018-19

Bench: Shri Vikram Singh Yadavshri Sandeep Singh Karhail

For Appellant: Shri C. NareshFor Respondent: Shri Satya Pal Kumar, CIT (DR)

Section 10Section 14ASection 250Section 32Section 90

IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL

Bank of India, Mumbai vs. ACIT-2(1)(2), Mumbai

In the result, the appeal by the Revenue for the assessment year 2018-

ITA 1451/MUM/2023[2016-17]Status: DisposedITAT Mumbai30 Jan 2026AY 2016-17

Bench: Shri Vikram Singh Yadavshri Sandeep Singh Karhailita No.1452/Mum/2023 Assessment Year : 2016-17 Assessment Year : 2018-19

For Appellant: Shri C. NareshFor Respondent: Shri Satya Pal Kumar, CIT (DR)

Section 10Section 14ASection 250Section 32Section 90

DCIT 27(1), Mumbai vs. Ashok Kumar Valchand Jain, Mumbai

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

ITA 5887/MUM/2025[2017-18]Status: DisposedITAT Mumbai29 Jan 2026AY 2017-18

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI MAKARAND VASANT MAHADEOKAR (Accountant Member)

Section 142(1)Section 143(3)Section 36(1)(iii)Section 68

271AAC is initiated separately on the income of Rs. 2,04,07,167/-.” 6. The third issue concerns disallowance of interest under section 36(1)(iii) of the Act. The Assessing Officer noted that the assessee had received interest-bearing loans aggregating to ₹5,39,07,462/-, repaid loans amounting ... account of alleged unexplained cash receipts, 10 Ashok Kumar Valchand Jain and (iii) disallowance of interest of ₹20,94,072/- under section 36(1)(iii). We proceed to examine each issue on its own factual footing, keeping in view the nature of the assessee’s business, the accounting records