“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)

Morarjee Textiles Limited, Mumbai vs. CIT, NFAC, Delhi

In the result, both the appeals of the assessee are allowed for statistical purposes

ITA 4111/MUM/2023[2017-18]Status: DisposedITAT Mumbai26 Jun 2024AY 2017-18

Bench: Ms. Kavitha Rajagopal & Shri Girish Agrawal

For Appellant: NoneFor Respondent: Smt. Mahita Nair, Sr. DR

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

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT

Tata International Ltd, Mumbai vs. Addl CIT 7(3), Mumbai

ITA 2232/MUM/2014[2009-10]Status: DisposedITAT Mumbai24 Jun 2024AY 2009-10

Bench: Shri Amit Shukla & Shri Gagan Goyal

For Appellant: Shri Nitesh Joshi a/w Ninad PatadeFor Respondent: Ms. Dhivya Ruth J., Ld. DR

Section 14Section 144CSection 36(1)Section 36(1)(iii)Section 37(1)Section 57

appellant in respect of capital borrowed by the appellant for the purpose of its business hence claimed by the appellant as deductible under section 36(1)(iii) of the Act. 1.2 Without prejudice generality the Appellant submits that the learned AO-DRP, not having controverted the evidence on record ... other purposes of the Appellant's business and (c) That, accordingly, the Interest of Rs. 2, 01, 61,000/- was allowable under Section 36(1) (iii) of the Act. 1.4 Without prejudice to the foregoing grounds, the Appellant submits that, in making their determinations in respect of the disallowance under

Sh. Aman Seth, Ludhiana vs. ITO, W-1(1), Ludhiana

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

ITA 1318/CHANDI/2017[2013-14]Status: DisposedITAT Chandigarh21 Jun 2024AY 2013-14

Bench: SHRI. VIKRAM SINGH YADAV (Accountant Member), SHRI. PARESH M. JOSHI (Judicial Member)

For Appellant: Shri Parikshit Aggarwal, C.AFor Respondent: Smt. Amanpreet Kaur, Sr. DR

Section 129Section 142(1)Section 143(1)Section 143(2)Section 250Section 253Section 36Section 44A

assessment proceedings and it is not for an assessment to be made on agreed basis. Therefore disallowance of Rs. 8,61,473/- under section 36(1)(iii) made by Ld. AO and sustained by the Ld. CIT(A) is illegal, unwarranted and uncalled for and may be deleted ... vehemently argued the case on merits and interalia contended that addition of Rs. 8,61,473/- on account of disallowance of interest under section 36(1)(iii) is bad in law and illegal and ought to be deleted as in the books of account assessee has shown advances for different

DCIT 9(1)(1), Mumbai vs. Afcons Infrastructure Ltd, Mumbai

In the result, the appeal of the Revenue and the C

ITA 4798/MUM/2015[2010-11]Status: DisposedITAT Mumbai21 Jun 2024AY 2010-11

Bench: Pavan Kumar Gadale, Jm & Ms Padmavathy S, Am

For Appellant: Shri J.D. Mistri / Nitesh Joshi, ARFor Respondent: Shri P. Sudhakar Naik, Sr. DR

Section 115JSection 36(1)(iii)

under: (i) Adjustment in respect of corporate guarantee to Afcons Construction Mideast LLC – Ground No. 1 to 4 (ii) Disallowance of interest under section 36(1)(iii) in respect of loans to Afcons Pauling JV, Afcons Strabag AG, and Afcons Gunanusa JV – Ground Nos. 5 & 6. (iii) Disallowance of depreciation ... made in assessee's case towards corporate guarantee. These grounds raised by the Revenue are dismissed accordingly. Disallowance of interest under section 36(1)(iii) in respect of loans to Afcons Pauling JV, Afcons Strabag AG, and Afcons Gunanusa JV – Ground Nos. 5&6. 11. On perusal of Schedules

M/S Vora Financial Services Private Limited, Mumbai vs. DCIT, Cir-2(3)(1), Mumbai

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

ITA 798/MUM/2024[2016-17]Status: DisposedITAT Mumbai20 Jun 2024AY 2016-17

Bench: Justice (Retd.) C V Bhadang, Hon’Ble& Shri B.R. Baskaranassessment Year 2016-17 M/S. Vora Financial Services Private Limited, 081, 806, 8Th Floor, Elite Square, 274, Perin Nariman St.Bazar Gate, Fort, Mumbai – 400 001 Pan:Aaacv-1975-E - Appellant Vs. Deputy Commissioner Of Income Tax, Circle – 2(3)(1), Mumbai, Aaykar Bhavan, M.K. Road, Mumbai – 400 020 - Respondent- Appellant By : Shri K.Gopal/Ms.Neha Praranjpe Respondent By : Ms. Rajeshwari Menon Date Of Hearing : 04/06/2024 Date Of Pronouncement : 20/06/2024

For Appellant: Shri K.Gopal/Ms.Neha PraranjpeFor Respondent: Ms. Rajeshwari Menon

Section 14Section 14ASection 36(1)(iii)

relates to the assessment year 2016-17. 2. The assessee has raised two issues, viz., (a) disallowance of interest expenditure under section 36(1)(iii) of the Act and (b) disallowance made under section 14 A of the act. At the time of hearing, the learned AR did not press

Krishna Palace Residency Pvt Ltd, Mumbai vs. Dy. Commissioner of Income Tax 5(2)(1), Mumbai

In the result, the appeal of the assessee bearing ITA No

ITA 4126/MUM/2023[2012-2013]Status: DisposedITAT Mumbai20 Jun 2024AY 2012-2013

Bench: Shri Anikesh Banerjeeand Shri Gagan Goyal

For Appellant: Dr. K Shivram a/w Shashi BekalFor Respondent: Shri P.D. Choughule (Addl.CIT) SR DR

Section 143(3)Section 14ASection 250Section 251Section 251(2)Section 35Section 36(1)(iii)

appeal thereby the disallowance of interest expense of Rs. 54,84,478/- and loan processing fee of Rs. 3,00,400/- under section 36(1)(iii) of the Act as the Ld. Assessing Officer had allowed the interest as an allowable deduction. 2. Without prejudice to the above ... erred in making the disallowance of interest expense of Rs. 54,84,478/- and loan processing fee of Rs. 3,00,400/- under section 36(1)(iii) of the Act as the proviso is not applicable to the facts of the appellant. - ' 3. Without prejudice to the above, the amount

M/S Centrient Pharmaceuticals India Private Limited, Nawanshahar vs. Additinal/Joint/Deputy/Asstt. C.It, ITO, Neac, Delhi

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

ITA 102/CHANDI/2021[2016-17]Status: DisposedITAT Chandigarh18 Jun 2024AY 2016-17

Bench: SHRI. AAKASH DEEP JAIN (Vice President), SHRI. VIKRAM SINGH YADAV (Accountant Member)

For Appellant: Shri Darpan Kirpalani, AdvocateFor Respondent: Shri Rohit Sharma, CIT DR

Section 144

partly allowed in light of aforesaid direction. 11. In Ground No. 8 to 10, the assessee has assailed disallowance of interest expenses under section 36(1)(iii) of the Act in respect of interest expenditure of borrowed fund utilization for capital expansion project. 12. During the course of hearing ... paid on loan of Rs.1203.52 million. The AO observed that no part of expenditure was capitalized by the assessee under proviso to section 36(1)(iii) of the Act. After considering submissions of assessee the Assessing Officer was not convinced and proportionately capitalized interest thereby making addition of Rs.4

Zodiac Ventures Ltd, Mumbai vs. Income Tax Officer Ward 1(3)(4), Mumbai

In the result, appeal filed by the assessee is allowed in the above terms

ITA 4754/MUM/2023[2016-17]Status: DisposedITAT Mumbai18 Jun 2024AY 2016-17

Bench: Ms. Padmavathy S & Shri. Raj Kumar Chauhanzodiac Ventures Ltd. Vs. Income Tax Officer Ward 404, Dev Plaza, 68, S.V. Road, 11(3)(4) Andheri West, Mumbai – Aayakar Bhawan, Maharshi 400058. Karve Road, Mumbai- Pan: Aafps7328J 400020. (Appellant) (Respondent)

Section 14ASection 250

High Court is correct in holding that interest amount being interest referable to funds given to subsidiaries is allowable as deduction under Section 36(1)(iii) of the Income Tax Act, 1961 (for short 'the Act') when the interest would not have been payable to banks, if funds were

DCIT-19(3), Mumbai vs. Shrenik Dheerajmal Siroya, Mumbai

In the result, the appeal by the Revenue for the assessment year 2012-

ITA 3031/MUM/2023[2012-13]Status: DisposedITAT Mumbai18 Jun 2024AY 2012-13

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Vimal Punmiya/Prakash BohraFor Respondent: Shri Manoj Kumar Singh

Section 14ASection 250Section 36(1)(iii)

partly allowed for statistical purposes. 13. The next issue that arises for our consideration pertains to deletion of disallowance under section 36(1)(iii) of the Act. Shrenik Dheerajmal Siroya ITA no.3004/Mum/2023 14. The brief facts of the case pertaining to this issue, as emanating from the record, are: During ... created of interest-bearing funds and non-interest bearing funds. Accordingly, the AO computed the disallowance of Rs.2,57,43,893 under section 36(1)(iii) of the Act. The learned CIT(A), vide impugned order, allowed the ground raised by the assessee on this issue by following the decision

DCIT-19(3), Mumbai vs. Shrenik Dheerajmal Siroya, Mumbai

In the result, the appeal by the Revenue for the assessment year 2012-

ITA 3030/MUM/2023[2014-15]Status: DisposedITAT Mumbai18 Jun 2024AY 2014-15

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Vimal Punmiya/Prakash BohraFor Respondent: Shri Manoj Kumar Singh

Section 14ASection 250Section 36(1)(iii)

DCIT-19(3), Mumbai vs. Shrenik Dheerajmal Siroya, Mumbai

In the result, the appeal by the Revenue for the assessment year 2012-

ITA 3004/MUM/2023[2013]Status: DisposedITAT Mumbai18 Jun 2024

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Vimal Punmiya/Prakash BohraFor Respondent: Shri Manoj Kumar Singh

Section 14ASection 250Section 36(1)(iii)

Beacon Higher Education Services Pvt Ltd, New Delhi vs. DCIT Circle-4(2), New Delhi

In the result, the appeal of the assessee is allowed

ITA 1748/DEL/2019[2012-13]Status: DisposedITAT Delhi14 Jun 2024AY 2012-13

Bench: Shri Saktijit Dey, Hon’Ble & Shri M. Balaganeshm/S. Beacon Higher Education Vs. Dcit, Services Pvt. Ltd, Circle-4(2), S-40, 2Nd Floor, Vasant Square Delhi Mall, Plot No. A, Sector-B, Vasant Kunj, New Delhi (Appellant) (Respondent) Pan:Aaecb1283F

For Appellant: Shri V. K. Agarwal, ARFor Respondent: Shri Kanv Bali, Sr. DR

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

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “A”: NEW DELHI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT AND SHRI M

Bit Corp Private Limited, Guntur vs. Assistant Commissioner of Income Tax, Circle-1(1), Guntur

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

ITA 181/VIZ/2023[2018-19]Status: DisposedITAT Visakhapatnam13 Jun 2024AY 2018-19

Bench: Shri Duvvuru Rl Reddy, Hon’Ble & Shri S Balakrishnan, Hon’Bleआयकर अपील सं./I.T.A.No.181/Viz/2023 (निर्धारण वर्ा/ Assessment Year : 2018-19) M/S Bitcorp Private Ltd. Vs. Asst. Commissioner Of Dr.No.8-14-28, Tobacco Colony Income Tax Mangalagiri Road Circle-1(1) Guntur Guntur [Pan : Aadcb4080D] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)

For Appellant: Shri M.V. Prasad, ARFor Respondent: Dr. Satyasai Rath, CIT(DR)

Section 143(2)Section 143(3)Section 36(1)(iii)

आयकरअपीलीयअधिकरण, धिशाखापटणमपीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAMBENCH, VISAKHAPATNAM श्रीदुव्वूरुआरएल रेड्डी, न्याधयकसदस्यएिंश्रीएसबालाकृष्णन, लेखासदस्यकेसमक्ष BEFORE SHRI DUVVURU RL REDDY

Mangesh Vasant Joshi, Thane vs. DCIT, Circle-3, Thane

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

ITA 746/MUM/2024[2013-14]Status: DisposedITAT Mumbai13 Jun 2024AY 2013-14

Bench: Shri Anikesh Banerjee & Shri Gagan Goyal

For Appellant: Shri Aditya RamchandranFor Respondent: Shri H.M. Bhatt, (SR.DR)

Section 143(3)Section 250Section 36(1)(iii)Section 37(1)

case and in law, Ld. CIT (A) has erred in confirming the disallowance of interest expenditure of Rs. 3,40,800 under Section 36(1)(iii). The Appellant craves leave to add, alter, amend, vary and / or withdraw any or all the above grounds of appeal.” 2. Brief facts ... question of law arises. 5. Tax appeal is dismissed. (AKIL KURESHI, J.)” 6. The Ld.AR argued that the Ld.AO made an addition under section 36(1)(iii) related to notional interest on balance amount of the loan Rs.28,40,000/- @12% which works out to Rs.3,40,800/-. The Ld.AR

Income Tax Officer-19(2)(2), Mumbai vs. Mukesh Hirachand Sanghvi, Mumbai

In the result, the appeal filed by the revenue stands

ITA 3510/MUM/2023[2009-10]Status: DisposedITAT Mumbai11 Jun 2024AY 2009-10

Section 133(6)Section 143(3)Section 145(3)Section 147Section 148Section 250Section 263Section 271(1)(C)Section 36(1)(iii)

assessee amounting to Rs. 12,35,979/- which the assessee has duly disclosed in subsequent assessment year and therefore provisions of section 36(1)(iii) are not attracted. The issue of allowability of interest u/s. 36(1)(tii) of the Act was considered in detail by the Hon'ble Apex ... 3510/MUM/2023 Mukesh Hirachand Sanghvi 22. In our opinion, the decisions relating to section 37 of the Act will also be applicable to section 36(1)(iii) because in section 37 also the expression used is "for the purpose of business". It has been consistently held in decisions relating to section

Tata Industries Limited, Mumbai vs. Addl.C.I.T., Range-2(3), Mumbai

ITA 3676/MUM/2009[2005-06]Status: DisposedITAT Mumbai07 Jun 2024AY 2005-06

For Respondent: Shri P.C Chhottary

Section 115JSection 143(3)Section 143(3)(ii)Section 14A

involved in making investments in ventures and companies promoted by it. According to the Assessing Officer, by claiming deduction for 4 interest under Section 36(1)(iii) of the Act, the Appellant had indirectly admitted that entire interest expenditure was related to borrowing which had resulted in investment. Therefore ... Year 2005-06, we find that the Assessing Officer had made disallowance under Section 14A of the Act. No disallowance was made under Section 36(1)(iii) of the Act. Therefore, the observations made by the Assessing Officer in the context of Section 36(1)(iii

C.M.D. Ratnakar Dy. Commissioner of Income Tax, Circle 2(1), Hyderabad vs. Jasper Industries Private Limited, Hyderabad

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

ITA 6/HYD/2021[2016-17`]Status: DisposedITAT Hyderabad05 Jun 2024

Bench: Shri Laliet Kumar, Hon'Ble & Shri Manjunatha G., Hon'Bleधििाारण वर्ा आ.अपी.सं अपीलार्थी / प्रत्‍यर्थी / / A.Y. Appellant Respondent / Ita No. M/S. Jasper Asst. Commissioner Industries Private Of Income Tax, Limited, 781/Hyd/2020 2016-17 Circle-2(1), Hyderabad Hyderabad [Pan: Aaacj5760H] M/S. Jasper Dy. Commissioner Industries Private Of Income Tax, 6/Hyd/2021 2016-17 Limited, Circle-2(1), Hyderabad Hyderabad [Pan: Aaacj5760H]

For Appellant: Shri C.S. Subrahmanyam and Shri EV Sri Krishna, ARsFor Respondent: Shri K. Meghnath Chowhan, CIT-DR

Section 14A

investments in equity instruments of various companies cannot be treated in isolation with business of the assessee for the purpose of provisions of section 36(1)(iii) of the Act. 6. The AO after considering relevant submissions of the assessee and also taken note of the financial statements ... paid on borrowed capital to the extent of diversion of funds for non-business purpose cannot be allowed as deduction in terms of Section 36(1)(iii) of the Act. Therefore, taking into account interest cost debited to profit and loss account, he has worked out average rate of interest

Jasper Industries Private Limited, Hyderabad vs. Assistant Commissioner of Income Tax, Circle -2(1), Hyderabad

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

ITA 781/HYD/2020[2016-17]Status: DisposedITAT Hyderabad05 Jun 2024AY 2016-17

For Appellant: Shri C.S. Subrahmanyam and Shri EV Sri Krishna, ARsFor Respondent: Shri K. Meghnath Chowhan, CIT-DR

Section 14A

Ind Swift Laboratories Ltd., Chandigarh vs. DCIT, Circle 1(1), Chandigarh

In the result, the appeal is allowed, as indicated

ITA 350/CHANDI/2023[2017-18]Status: DisposedITAT Chandigarh04 Jun 2024AY 2017-18

Bench: SHRI A.D.JAIN (Vice President), SHRI KRINWANT SAHAY (Accountant Member)

For Appellant: Shri T.N.Singla, C.AFor Respondent: Shri Rohit Sharma, CIT-DR

Section 250Section 35Section 35(1)Section 35(1)(i)Section 35(2)

unrelated parties for business purposes; and that therefore, under any circumstances, no notional interest on advances to related parties can be disallowed under section 36(1)(iii) of the Act. 26. The ld. CIT(DR), on the other hand, has sought to place strong reliance on the impugned order ... unrelated parties was of Rs.30.39 crore. The assessing officer made a notional disallowance of Rs.14,22,16,574/- under the provisions of section 36(1)(iii) of the Income Tax Act. Out of this amount, interest of Rs.96,07,216/- stood already disallowed by the assessee itself. Accordingly, the balance

DCIT, Circle-6, Jaipur, Ncrb vs. Barmer Lignite Mining Company Limited, Jaipur

In the result, the appeal of the Revenue is dismissed

ITA 71/JPR/2024[2012-13]Status: DisposedITAT Jaipur04 Jun 2024AY 2012-13

Bench: SHRI SANDEEP GOSAIN (Judicial Member), DR MITHA LAL MEENA (Accountant Member)

For Appellant: Shri P.C. Parwal CAFor Respondent: Shri Arvind Kumar, CIT-DR fu/kZkfjrh dh vksj ls@

Section 143(3)Section 271(1)(c)

assessee was in the nature of interest as defined u/s 2(28 A) of the Income Tax Act and was also hit by Section 36(1)(iii) of the I.T. Act in the case of assessee. Accordingly, expenditure of Rs. 52,58,106/- was disallowed by the AO and penalty