“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)

The Assistant Commr. of Income Tax, Gandhidham Circle, Gandhinagar vs. M/S Kutch Salt & Allied Industries Ltd., Gandhidham

In the result, cross objections filed by the assessee are allowed for statistical purposes

ITA 235/RJT/2016[2011-12]Status: DisposedITAT Rajkot17 Mar 2025AY 2011-12

Bench: Dr. Arjun Lal Saini & Shri Dinesh Mohan Sinhait (Ss)A No.233& 234 & 235 & 236 /Rjt/2016 Assessment Year: (2009-10 To 2012-13) (Hybrid Hearing) Asstt. Commissioner Of Income Tax, Vs. M/S. Kutch Salt & Allied Gandhidham Circle, Industries Ltd., Gandhidham - Kutch Maitri Bhavan, Plot No.-18, Sector-8, Gandhidham - Kutch "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aaact1769L (Appellant) (Respondent)

For Appellant: Shri K. C. Thacker, Ld. A.RFor Respondent: Shri Sanjay Punglia,Ld.CIT (DR)

Section 36(1)(iii)

erred in law and on facts in deleting the addition made on account of disallowance of interest under section 36(1)(iii) of Rs.3,16,82,477/- though the assessee had made interest free advances out of interest bearing funds. This is ground No.3 of revenue`s appeal ... erred in law and on facts in deleting the addition made on account of disallowance of interest under section 36(1)(iii) of Rs.3,16,82,477/- , though the assessee had made interest free advances out of interest bearing funds. This is ground No.3 of revenue`s appeal

The Assistant Commr. of Income Tax, Gandhidham Circle, Gandhinagar vs. M/S Kutch Salt & Allied Industries Ltd., Gandhidham

In the result, cross objections filed by the assessee are allowed for statistical purposes

ITA 234/RJT/2016[2010-11]Status: DisposedITAT Rajkot17 Mar 2025AY 2010-11

For Appellant: Shri K. C. Thacker, Ld. A.RFor Respondent: Shri Sanjay Punglia,Ld.CIT (DR)

Section 36(1)(iii)

The Assistant Commr. of Income Tax, Gandhidham Circle, Gandhinagar vs. M/S Kutch Salt & Allied Industries Ltd., Gandhidham

In the result, cross objections filed by the assessee are allowed for statistical purposes

ITA 233/RJT/2016[2009-10]Status: DisposedITAT Rajkot17 Mar 2025AY 2009-10

For Appellant: Shri K. C. Thacker, Ld. A.RFor Respondent: Shri Sanjay Punglia,Ld.CIT (DR)

Section 36(1)(iii)

Ladhuram Toshniwal and Sons Electricals Pvt. Ltd., Kolkata vs. ACIT, Cen. Cir. 4(4), Kolkata

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

ITA 659/KOL/2024[2018-19]Status: DisposedITAT Kolkata17 Mar 2025AY 2018-19

Bench: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]

Section 143(2)Section 143(3)Section 36(1)(iii)Section 40a(2)(b)

आयकर अपील"य अ"धकरण, कोलकाता पीठ “ए’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA "ी राजेश कुमार

Shree Auro Iron Limited, Jaipur vs. Principal Commissioner of Income Tax-I, Jaipur

In the result, this appeal of the assessee is allowed

ITA 788/JPR/2024[2016-17]Status: DisposedITAT Jaipur12 Mar 2025AY 2016-17

For Appellant: Shri Pravin Saraswant, CAFor Respondent: Mrs. Alka Gautam, CIT DR

Section 142(1)Section 143Section 145ASection 147Section 148Section 151Section 263Section 48

Account, implying that the double benefit of the same expense has not been claimed. This practice is in compliance with section 36(1)(iii) of the Income Tax Act, 1961 which lays down for not allowing interest on funds borrowed for the purpose of the acquisition of capital assets ... Account, implying that the double benefit of the same expenses has not been claimed. This practice is in compliance with Section 36(1)(iii) of the Income Tax Act, 1961 f) Assessee is a limited liability company whose books of accounts subjected to the Tax Audit under the Income

M/S Saber Packaging Pvt. Ltd., Ludhiana vs. DCIT, CC-II, Ludhiana

In the result, the appeal is partly allowed for statistical

ITA 349/CHANDI/2019[2009-10]Status: DisposedITAT Chandigarh12 Mar 2025AY 2009-10

Bench: Shri Laliet Kumar & Shri Krinwant Sahay

For Appellant: None (withdrawal application )For Respondent: Smt. Kusum Bansal, CIT DR

Section 132Section 133Section 142(1)Section 143(2)Section 153ASection 36Section 36(1)(iii)

assessee and hence, any debit balance outstanding against this party is in the nature of loans and advances without any commercial expediency. Section 36(1)(iii) of the Act, 1961 categorically says that interest expenses incurred for capital borrowed for business purposes only will be allowable. The assessee has borrowed

DCIT, Circle-1(1), Chandigarh vs. M/S Saluja Motors Pvt. Ltd., Chandigarh

The appeal of the Revenue is dismissed

ITA 62/CHANDI/2023[2016-17]Status: DisposedITAT Chandigarh11 Mar 2025AY 2016-17

Bench: Shri Rajpal Yadav & Shri Krinwant Sahay

For Appellant: Shri Tej Mohan Singh, AdvocateFor Respondent: Dr. Ranjit Kaur, Addl.CIT, Sr.DR

Section 142(1)Section 143(2)Section 36(1)(iii)

Revenue has pleaded that ld. CIT(A) has erred in deleting addition of Rs.45,70,407/- which was added by the AO under Section 36(1)(iii) of the Act by making a disallowance out of interest expenditure. 4. The brief facts of the case are that assessee company ... procuring those cars from manufacturers for sale. Thus, ld. AO miserably failed to demonstrate as to how interest expenditure is not allowable under Section 36(1)(iii) of the Act. The ld. CIT(A) has rightly construed the dispute and rightly deleted the disallowances. The CIT(A) has called

Deputy Commissioner of Income Tax Circle-7 Pune, Pune vs. Kolte Patil Integrated Townships Limited, Pune

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

ITA 2023/PUN/2024[2014-15]Status: DisposedITAT Pune10 Mar 2025AY 2014-15

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

For Appellant: Shri Nikhil S PathakFor Respondent: Shri Amol Khairnar CIT-DR

Section 143(3)Section 147Section 148Section 148ASection 151

rightly been debited to Profit & Loss account in the year in which the interest expenditure is incurred. 25. Referring to the provisions of section 36(1)(iii), he submitted that once the borrowed funds are utilized for the purpose of business of the assessee, interest is allowable as deduction ... such interest expenditure has to be allowed in the year in which such interest expenditure is incurred. 48. We find the provisions of section 36(1)(iii) of the Act which read as under: (iii) the amount of the interest paid in respect of capital borrowed for the purposes

Deputy Commissioner of Income Tax Circle 7 Pune, Pune vs. Kolte Patil Integrated Townships Limited, Pune

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

ITA 2011/PUN/2024[2016-17]Status: DisposedITAT Pune10 Mar 2025AY 2016-17

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

For Appellant: Shri Nikhil S PathakFor Respondent: Shri Amol Khairnar CIT-DR

Section 143(3)Section 147Section 148Section 148ASection 151

DCIT-4(1)(1), Mumbai vs. B Raheja Properties Private Limited, Mumbai

In the result, appeal of the Revenue is dismissed

ITA 2677/MUM/2023[2015]Status: DisposedITAT Mumbai10 Mar 2025

Bench: Shri Saktijit Dey, Hon’Ble & Shri Girish Agrawalassessment Year: 2015-16

For Appellant: Shri Ravindra Poojary, AdvocateFor Respondent: Ms. Monika H. Pande, Sr. AR

Section 143(3)Section 36(1)(iii)Section 36(1)(ill)Section 40

fixed in nature and other wise. Merely not having revenue receipts cannot be the yard stick to decide allowability of the expenditure. Section 36(1)(iii) states that the amount of interest paid in respect of capital borrowed for the purpose of business or profession 7 B Raheja Proper ... specific purpose of purchasing a land for starting a new residential project. It claimed interest paid on such loan as deduction under section 36(1)(iii). The Assessing Officer disallowed same on ground that since no activity had commenced in said new project and land was were

Galaxy International Overseas, Dhuva, Wankaner vs. Income Tax Officer, Ward-1, Morbi

ITA 54/RJT/2024[2014-15]Status: DisposedITAT Rajkot07 Mar 2025AY 2014-15

Bench: Dr. Arjun Lal Saini, Am. & Dinesh Mohan Sinha, Jm आयकरअपीलसं./Ita No. 54/Rjt/2024 "नधा"रणवष" / Assessment Year: (2014-15) (Hybrid Hearing) Galaxy International Overseas Income Tax Officer, Vs. C/O. Sarda & Sarda, Cas, Ward – 1, 1St Floor, “Sakar”, Shakti Chambers, Nh27, Anand Dr. Radhakrishnan Road, Nagar, Opp. Rajkumar College, Morbi - 363642 Rajkot – 360001. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aacfg6749C (Appellant) (Respondent) Appellant By : Shri Vimal Desai, Ld. Ar Respondent By : Shri Sanjay Punglia, Ld. Cit(Dr) Date Of Hearing : 17/12/2024 Date Of Pronouncement : 07/03/2025

For Appellant: Shri Vimal Desai, Ld. ARFor Respondent: Shri Sanjay Punglia, Ld. CIT(DR)

Section 143(1)Section 143(3)Section 263Section 36(1)(iii)Section 44A

should not be added to the total income in your case for the year under consideration as per the provisions of Section 36(1)(iii) of the Income tax Act-1961 in absence of not a single plausible justification. The assessee has filed its reply dated 19/11/2019. The same ... Hero Cycles therefore, as a matter fact, it was to be held that such a nexus did not exist warranting any disallowance under section 36(1)(iii) of the Act; thirdly, there was clear and self-evident mutuality and business expediency in sizable inter-se transactions between the assessee

Oracle Granito Limited, Ahmedabad vs. The Dy.CIT, Circle-3(1)(2) Now Circle-3(1)(1), Ahmedabad

In the result, the appeal of the assessee is allowed

ITA 336/AHD/2024[2008-09]Status: DisposedITAT Ahmedabad07 Mar 2025AY 2008-09

Bench: Smt.Annapurna Gupta & Shri T.R. Senthil Kumarassessment Year : 2008-09 Oracle Granito Limited The Dcit, Cir.3(1)(2) 206, Dev Arc, Second Floor Vs Now Cir.3(1)(1) Nr.Fun Republic Ahmedabad. Opp: Big Bazar S.G. Highway Road Ahmedabad 380 015. Pan : Aaaco 6238 P (Applicant) (Responent) : Assessee By Shri Aseem Thakkar, Ar Revenue By : Shri Amit Pratap Singh, Sr.Dr सुनवाई क" तारीख/Date Of Hearing : 09/01/2025 घोषणा क" तारीख /Date Of Pronouncement: 07/03/2025

For Respondent: Shri Amit Pratap Singh, Sr.DR

Section 143(3)Section 250Section 254Section 36(1)(iii)

ld.CIT(A) of disallowance of interest expenses amounting to Rs.10,43,063/- made by the AO in terms of provisions of section 36(1)(iii) of the Act. 4. This is the second round before the Tribunal. In the first round, the AO had noted that the interest attributable ... presumption is that the same fund has been deployed for investment in capital assets, calling for no disallowance of interest 4 under section 36(1)(iii) of the Act. In this regard, he drew our attention to the order of the Hon’ble Apex Court in the case

DCIT-2(3)(1), Mumbai vs. Nouveau Developers Private Limited, Mumbai

In the result, cross objection by the assessee is allowed for statistical purposes and appeal by Revenue is dismissed

ITA 2129/MUM/2024[2017-18]Status: DisposedITAT Mumbai06 Mar 2025AY 2017-18

Bench: Shri. Saktijit Dey, Hon’Ble & Shri. Girish Agrawalassessment Year: 2017-18 Deputy Commissioner Of Nouveau Developers Private Income-Tax-2(3)(1) Limited Mumbai. 702, Natraj, Mv Road, Junction, Vs. Western Express Highway, Andheri (East), Mumbai – 400069. (Pan: Aaccn5280G) (Appellant) (Respondent)

For Appellant: Shri. Naresh Kumar, ARFor Respondent: Ms. Monika H. Pande, SR. AR

Section 115JSection 143(3)Section 154Section 43CSection 50C

loan was obtained for the project of construction of flats, which is stock in trade, the assessee is entitled to deduction under section 36(1) (iii) of the Act in respect of interest expenditure on such loans. The Hon'ble Court further held that while adjudicating the claim of deduction ... under section 36(1) (iii) of the Act the nature of the expense, whether the expense was on capital account or revenue account was irrelevant, as the section itself says that interest paid by the assessee on capital borrowed is allowable as a deduction. 19. In the present case, undisputedly

DCIT 3(3) (1), Mumbai vs. M/S. Shapoorji Pallonji and Co. Pvt. Ltd, Mumbai

In the result, both the appeals of the assessee are partly allowed and cross objections are dismissed

ITA 2234/MUM/2021[2015-16]Status: DisposedITAT Mumbai06 Mar 2025AY 2015-16

Bench: Shri Amarjit Singh & Shri Rahul Chaudhary

For Appellant: Shri Rajan Vora a/w Shri Nikhil Tiwari & Ms. Palak MehtaFor Respondent: Shri Ajay Chandra, CIT/DR

Section 115JSection 14ASection 36(1)(iii)Section 92C

while computing the book profit in terms of provisions contained under section 115JB of the Act. C. Disallowance of notional interest expenditure under section 36(1)(iii) of the Act: Rs. 19,81,00,000 CO Nos. 53 & 54/Mum/2022 Shapoorji Pallonji and Co. Pvt. Ltd. 5. erred in challenging ... order of the Hon'ble CIT(A) with regard to disallowance of notional interest expenditure of Rs. 19,81,00,000 under section 36(1)(iii) of the Act, on the ground that interest bearing funds were advanced for non-business purposes without appreciating the fact that the Respondent

DCIT 3(3) (1), Mumbai vs. M/S. Shapoorji Pallonji and Co.Pvt. Ltd, Mumbai

In the result, both the appeals of the assessee are partly allowed and cross objections are dismissed

ITA 2232/MUM/2021[2016-17]Status: DisposedITAT Mumbai06 Mar 2025AY 2016-17

Bench: Shri Amarjit Singh & Shri Rahul Chaudhary

For Appellant: Shri Rajan Vora a/w Shri Nikhil Tiwari & Ms. Palak MehtaFor Respondent: Shri Ajay Chandra, CIT/DR

Section 115JSection 14ASection 36(1)(iii)Section 92C

Shapoorji Pallonji & Company Pvt. Ltd, Mumbai vs. DCIT Cir 3(3) (1), Mumbai

In the result, both the appeals of the assessee are partly allowed and cross objections are dismissed

ITA 2027/MUM/2021[2016-17]Status: DisposedITAT Mumbai06 Mar 2025AY 2016-17

Bench: Shri Amarjit Singh & Shri Rahul Chaudhary

For Appellant: Shri Rajan Vora a/w Shri Nikhil Tiwari & Ms. Palak MehtaFor Respondent: Shri Ajay Chandra, CIT/DR

Section 115JSection 14ASection 36(1)(iii)Section 92C

Shapoorji Pallonji and Company Pvt. Ltd, Mumbai vs. DCIT Cir 3(3) (1), Mumbai

In the result, both the appeals of the assessee are partly allowed and cross objections are dismissed

ITA 2026/MUM/2021[2015-16]Status: DisposedITAT Mumbai06 Mar 2025AY 2015-16

Bench: Shri Amarjit Singh & Shri Rahul Chaudhary

For Appellant: Shri Rajan Vora a/w Shri Nikhil Tiwari & Ms. Palak MehtaFor Respondent: Shri Ajay Chandra, CIT/DR

Section 115JSection 14ASection 36(1)(iii)Section 92C

M/S. Gajanan Cotspin, Buldhana vs. Income Tax Officer, Ward-2, Khamgaon

In the result, assessee’s appeal stands allowed

ITA 133/NAG/2023[2014-15]Status: DisposedITAT Nagpur05 Mar 2025AY 2014-15

Bench: Shri V. Durga Rao

For Appellant: Ms. Shristi PandyFor Respondent: Shri Abhay Y. Marathe

paid to creditors (against Unsecured Loans) up to the amount given interest free to Shri Govind N. Bhattad should not be disallowed under section 36(1)(iii) of the Income Tax Act, 1961 ("the Act") as the interest bearing fund utilized for non-business purpose. In response, the assessee furnished

The Asstt. Commissioner of Incometax, Central Circle-1(2), Ahmedabad vs. Ginger Properties Pvt. Ltd., Ahmedabad

In the result, the appeal of the Revenue is dismissed

ITA 483/AHD/2023[2019-20]Status: DisposedITAT Ahmedabad05 Mar 2025AY 2019-20

Bench: Ms. Suchitra Kamble & Shri Narendra Prasad Sinha

interest on borrowed funds which has been diverted towards interest free loans and advances and non-business investment is not admissible under Section 36(1)(iii) of the Act. Thus, the Assessing Officer added Rs.60,00,631/- on account of interest free loan under Section 36(1)(iii

Ginger Properties Private Limited, Ahmedabad vs. The Asstt. Commissioner of Incometax, Central Circle-1(2), Ahmedabad

In the result, the appeal of the Revenue is dismissed

ITA 433/AHD/2023[2019-20]Status: DisposedITAT Ahmedabad05 Mar 2025AY 2019-20

Bench: Ms. Suchitra Kamble & Shri Narendra Prasad Sinha