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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)

DCIT Central Circle-06, New Delhi vs. Praveen Kumar Jolly, New Delhi

In the result, appeal of the Revenue in No

ITA 1654/DEL/2023[2011-12]Status: DisposedITAT Delhi15 Oct 2025AY 2011-12

Bench: Shri Yogesh Kumar U.S. & Shri Manish Agarwal[Assessment Year : 2011-12] Dcit, Vs Praveen Kumar Jolly, Central Circle-06, 39/1, East Patel Nagar, New Delhi New Delhi-110008. Pan-Aagpj0144C Appellant Respondent

Section 139(1)Section 147Section 148Section 250Section 68

which has been later disallowed by the Assessing Officer mentioning that the appellant has utilized such loans for non business purposes. As per section 36(1)(iii) of Income Tax Act, the amount of interest paid in respect of capital borrowed for the purposes of business or profession ... Supreme Court held that the expression 'for the purpose of business' occurring under the provision of section 36(1)(iii) is wider in scope than the expression 'for the purpose of earning income, profits or gains', and this has been the consistent view of the Supreme Court. [Para

DCIT, New Delhi vs. M/S. Vodafone Essar Digilink Ltd., New Delhi

ITA 1158/DEL/2015[2010-11]Status: DisposedITAT Mumbai14 Oct 2025AY 2010-11

Bench: SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER SHRI OMKARESHWAR CHIDARA (Accountant Member)

For Appellant: Shri Ketan Ved & Shri Ninad PatadeFor Respondent: Shri Pankaj Kumar
Section 143(1)Section 143(3)Section 144C(1)Section 144C(5)Section 92C

purpose of extension of its business. The extension of business has not been specifically defined in the context of Proviso to Section 36(1)(iii) of the Act. It was contended that based on general/commercial parlance, with respect to the telecommunications business, 'extension' of business may be construed to mean ... business (not leading to extension per se) was not covered by the said proviso and was clearly deductable under the provisions of Section 36(1)(iii) of the Act. However, the Assessing Officer was not convinced. The Assessing Officer noted that the Assessee had raised both secured and ITA No.1073/Del/2015

Vodafone Digilink Limited, New Delhi vs. Deputy Commissioner of Income-Tax, New Delhi

ITA 1073/DEL/2015[2010-11]Status: DisposedITAT Mumbai14 Oct 2025AY 2010-11
Section 143(1)Section 143(3)Section 144C(1)Section 144C(5)Section 92C

purpose of extension of its business. The extension of business has not been specifically defined in the context of Proviso to Section 36(1)(iii) of the Act. It was contended that based on general/commercial parlance, with respect to the telecommunications business, 'extension' of business may be construed to mean ... business (not leading to extension per se) was not covered by the said proviso and was clearly deductable under the provisions of Section 36(1)(iii) of the Act. However, the Assessing Officer was not convinced. The Assessing Officer noted that the Assessee had raised both secured and ITA No.1073/Del/2015

The Asstt. Commissioner of Income Tax, Circle-2(1)(1), Ahmedabad vs. Gujarat Apollo Industries Limited, Mehsana

In the result, the appeal of the Revenue is dismissed

ITA 407/AHD/2023[2018-19]Status: DisposedITAT Ahmedabad09 Oct 2025AY 2018-19

Bench: Dr. B.R.R. Kumar, Vice-Shri Siddhartha Nautiyalthe Assistant Commissioner Gujarat Apollo Industries Ltd., Vs. Of Income Tax, Block No.486,487, 488, Circle-2(1)(1), Ahmedabad Mehsana Highway, Ahmedabad. Opp. Water Park, Dholasan, Mehsana-382732. [Pan :Aaacg7248 P] (Appellant) .. (Respondent) Appellant By : Shri Bp Srivastava, Sr. Dr Respondent By: Shri Mehul K Patel, Ar Date Of Hearing 06.08.2025 Date Of Pronouncement 09.10.2025 O R D E R Per Dr. B.R.R. Kumar, Vice-:-

For Appellant: Shri BP Srivastava, Sr. DRFor Respondent: Shri Mehul K Patel, AR
Section 115JSection 143(3)Section 14ASection 250Section 36Section 37(1)

Supreme Court held that the expression 'for the purpose of business' occurring under the provision of section 36(1 )(iii) is wider in scope than the expression 'for the purpose of earning income, profits or gains', and this has been the consistent view of the Supreme Court. [Para ... whether this was done as a measure of commercial expediency. [Para 21] The decisions relating to section 37 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

Maruti Suzuki India Ltd., New Delhi vs. DCIT, New Delhi

In the result, all the three appeals of the assessee are allowed as indicated above and the appeal of Revenue is partly allowed

ITA 901/DEL/2017[2012-13]Status: DisposedITAT Delhi08 Oct 2025AY 2012-13

Bench: Shris.Rifaur Rahman & Shri Vimal Kumar

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri G.C. Srivastava, Spl. Counsel for the Department
Section 143(3)Section 144CSection 144C(1)Section 144C(5)Section 14ASection 32Section 35Section 43B

disallowance related to the interest expenditure and administrative expenses. If the assessee has claimed interest expenses as a deduction in terms of section 36(1)(iii) of the Act in its P&L Account. The AO is required to examine and after considering the accounts of the assessee whether

M/S Maruti Suzuki India Ltd., New Delhi vs. DCIT, New Delhi

In the result, all the three appeals of the assessee are allowed as indicated above and

ITA 287/DEL/2016[2011-12]Status: DisposedITAT Delhi08 Oct 2025AY 2011-12

Bench: Shris.Rifaur Rahman & Shri Vimal Kumar

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri G.C. Srivastava, Spl. Counsel for the Department
Section 143(3)Section 144CSection 144C(1)Section 144C(5)Section 14ASection 35Section 43B

disallowance related to the interest expenditure and administrative expenses. If the assessee has claimed interest expenses as a deduction in terms of section 36(1)(iii) of the Act in its P&L Account. The AO is required to examine and after considering the accounts of the assessee whether

DCIT, New Delhi vs. M/S. Maruti Suzuki India Ltd., New Delhi

In the result, all the three appeals of the assessee are allowed as indicated above and the appeal of Revenue is partly allowed

ITA 1024/DEL/2016[2011-12]Status: DisposedITAT Delhi08 Oct 2025AY 2011-12

Bench: Shris.Rifaur Rahman & Shri Vimal Kumar

For Appellant: Shri Ajay Vohra, Sr. AdvocateFor Respondent: Shri G.C. Srivastava, Spl. Counsel for the Department
Section 143(3)Section 144CSection 144C(1)Section 144C(5)Section 14ASection 32Section 35Section 43B

disallowance related to the interest expenditure and administrative expenses. If the assessee has claimed interest expenses as a deduction in terms of section 36(1)(iii) of the Act in its P&L Account. The AO is required to examine and after considering the accounts of the assessee whether

JCIT(OSD) Central Circle 1, Jhandewalan vs. Sahara India Real Estate Corporation Ltd., Lucknow

ITA 1085/DEL/2024[2017-18]Status: DisposedITAT Delhi07 Oct 2025AY 2017-18

Bench: Sh. Satbeer Singh Godara & Sh. S. Rifaur Rahman

For Appellant: Sh. Ajay Vohra, Sr. Adv. &For Respondent: Sh. Mahesh Kumar, CIT-DR
Section 143(3)

free funds generated or available with the company. Then, the borrowed capital in hand in that case and interest expenditure was deductible under section 36(1)(iii) of the Income-tax Act, 1961. The Tribunal held that the interest-free fund available to the assessee is sufficient to meet ... precise reason that the learned Assessing Officer had computed notional interest @ 12% on advances made to sister concerns without invoking section 36(1)(iii) of the Act which couldn’t be concurred with since not made under any specific provision in the Act. That being the clinching case, we hold

Maharashtra State Road Development Corporation Ltd, Mumbai vs. DCIT 5(2), Mumbai

ITA 696/MUM/2012[2008-09]Status: DisposedITAT Mumbai06 Oct 2025AY 2008-09

Bench: Shri Narender Kumar Choudhry (Jm) & Shri Omkareshwar Chidara (Am) Maharashtra State Road Dcit-5(2) Development Corporation Ltd. Aayakar Bhavan M.S.R.D.C. Ltd. Vs. M. K. Road Priyadarshini Park Nepenasea Mumbai-400 020. Road, Mumbai-400 036. Pan : Appellant Respondent

For Appellant: Shri Leyaqat Ali AafaquiFor Respondent: Shri Dalpat Shah
Section 14ASection 37Section 43B

IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “B” Bench, Mumbai. Before Shri Narender Kumar Choudhry (JM) & Shri Omkareshwar Chidara (AM

Caspian Impact Investments Private Limited, Hyderabad vs. DCIT., Circle-1(1), Hyderabad

In the result, the appeal of the assessee is allowed

ITA 749/HYD/2025[2019-20]Status: DisposedITAT Hyderabad03 Oct 2025AY 2019-20

Bench: Shri Ravish Sooda N D Shri Madhusudan Sawdiaआ.अपी.सं /Ita No.749/Hyd/2025 (िनधा"रण वष"/Assessment Year: 2019-20) Caspian Impact Vs. Dy.Cit Investments Private Ltd, Circle 1(1) Hyderabad Hyderabad Pan:Aadcs4132K (Appellant) (Respondent) िनधा""रती "ारा/Assessee By: Shri Hiten Thakkar, Advocate राज" व "ारा/Revenue By:: Dr. Sachin Kumar, Sr.Dr सुनवाई की तारीख/Date Of Hearing: 25/09/2025 घोषणा की तारीख/Pronouncement: 03/10/2025 आदेश/Order Per Madhusudan Sawdia, A.M.: This Appeal Is Filed By M/S. Caspian Impact Investments Private Limited, (“The Assessee”), Feeling Aggrieved By The Order Passed By The Learned Addl/Jcit (A)-1, Mumbai (“Ld. First Appellate Authority”), Dated 27.02.2025 For The A.Y. 2019-20. 2. The Assessee Has Raised The Following Grounds Of Appeal:

For Appellant: Shri Hiten Thakkar, AdvocateFor Respondent: : Dr. Sachin Kumar, Sr.DR
Section 115JSection 143(1)(a)Section 36(1)(iii)Section 37(1)Section 43B

processed by CPC under section 143(1)(a) of the Act on 09.03.2021. CPC made the additions of Rs.1,64,955/- under section 36(1)(iii), Rs.13,22,458/- under section 37(1) and Rs.10,41,545/- under section 43B of the Act, making a total adjustment of Rs.25

Nimbeshwar Gudadram Desai, Ahmedabad vs. The Dy.CIT, Circle-3(1)(1) (Previously Circle-3(3)), Ahmedabad

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

ITA 1436/AHD/2025[2017-18]Status: DisposedITAT Ahmedabad01 Oct 2025AY 2017-18

Bench: DR. BRR Kumar (Vice President), Shri Siddhartha Nautiyal (Judicial Member)

Section 143(3)Section 194ASection 36(1)Section 40

Officer disallowed the said sum of Rs. 8,95,536/- and added it to the total income. The fourth addition was made under section 36(1)(iii) of the Act on account of interest. The Assessing Officer observed that the assessee had secured loans of Rs. 12.61 crores on which ... State Road Transport Corporation. Accordingly, the disallowance was confirmed and the ground was dismissed. On the fourth issue of disallowance of interest under section 36(1)(iii) of the Act, the assessee submitted that the advances were for business purposes and, in one case, funds were misused by a third

Assistant Commissioner of Income Tax, Aaykar Bhawan, Panchkula vs. Haryana Warehousing Corporation, Panchkula, Haryana

In the result, Revenue’s appeal is dismissed whereas, the appeal filed by the Assessee is allowed for statistical purposes

ITA 456/CHANDI/2023[2016-17]Status: DisposedITAT Chandigarh30 Sept 2025AY 2016-17

Bench: SHRI. LALIET KUMAR (Judicial Member), SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Sh. Nalin Nohria, CA andFor Respondent: Sh. B.K. Nohria, CA
Section 143(3)Section 35A

Panchkula has erred in law and facts in upholding the contention of the learned AO in adding Rs.59,12,172/- under section 36(1)(iii) of the Income Tax Act, 1961 inspite of complete documents alongwith reasons and no additional documents called for which is the base of the upholding

Haryana State Warehousing Corporation, Panchkula vs. ACIT, Circle, Panchkula

In the result, Revenue’s appeal is dismissed whereas, the appeal filed by the Assessee is allowed for statistical purposes

ITA 436/CHANDI/2023[2016-17]Status: DisposedITAT Chandigarh30 Sept 2025AY 2016-17

Bench: SHRI LALIT KUMAR, NYAYIK Sadasy, SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Sh. Nalin Nohria, CA andFor Respondent: Sh. B.K. Nohria, CA
Section 143(3)Section 35A

Panchkula has erred in law and facts in upholding the contention of the learned AO in adding Rs.59,12,172/- under section 36(1)(iii) of the Income Tax Act, 1961 inspite of complete documents alongwith reasons and no additional documents called for which is the base of the upholding

M/S. Suravi Infrastructure, Mumbai vs. Income Tax Officer Ward 23(3)(1), Mumbai

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

ITA 3702/MUM/2025[2018-19]Status: DisposedITAT Mumbai30 Sept 2025AY 2018-19

Bench: Smt. Beena Pillai () & Ms. Padmavathy S ()

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

carried forward to subsequent year on the ground that no business activity is being carried out and that disallowance is warranted as per section 36(1)(iii) of the Act. On the facts and in the circumstances of the case and in law, the disallowances made by the Ld.AO ought ... submitted that the interest cost was carry forwarded to subsequent years. It is thus submitted that, question of disallowing the same under section 36(1)(iii) does not arise. The Ld.AR emphasised that no new loans were taken by the assessee during the year. 6.3 On the contrary the Ld.DR

Lupin Limited, Mumbai vs. Principal Commissioner of Income Tax - 3, Mumbai

In the result, the appeal of the assessee is allowed

ITA 3257/MUM/2025[2019-20]Status: DisposedITAT Mumbai30 Sept 2025AY 2019-20

Bench: Shri Vikram Singh Yadav & Shri Raj Kumar Chauhanassessment Year : 2019-20 Lupin Limited, Principal Commissioner Of 3Rd Floor, Kalpataru Inspire, Income Tax-3, Off Western Express Highway, Vs. Room No. 612, 6Th Floor, Santacruz (East), Aayakar Bhavan, Mumbai-400055. Maharshi Karve Road, Pan : Aaacl1069K Mumbai-400020. (Appellant) (Respondent) Assessee By : Shri Rajan Vora & Shri Pranay Gandhi Revenue By : Shri Rajesh Kumar Yadav, Cit-Dr

For Appellant: Shri Rajan Vora &For Respondent: Shri Rajesh Kumar Yadav, CIT-DR
Section 115JSection 143(3)Section 263Section 43(6)

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “A” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI RAJ

General Industrial Corporation, Mumbai vs. ITO Ward 17(1)(4), Mumbai

In the result, ground of appeal is allowed for statistical purpose

ITA 3785/MUM/2025[2017-18]Status: DisposedITAT Mumbai29 Sept 2025AY 2017-18

Bench: Shri Pawan Singh& Smt.Renu Jauhri(Physical Hearing)

Section 143(3)Section 250Section 254(1)Section 36(1)(iii)Section 68

1 ITA No.3785/Mum/025 General Industrial Corporation IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL

Addl.CIT, Special Range-5, New Delhi vs. Janak Crane P.Ltd, New Delhi

In the result, appeals filed by the assessee as well as the Revenue are allowed for

ITA 7977/DEL/2018[2013-14]Status: DisposedITAT Delhi29 Sept 2025AY 2013-14

Bench: Shri Anubhav Sharma & Shri Krinwant Sahayasstt. Yr: 2013-14

Section 144Section 194A(1)Section 36(1)(iii)Section 40Section 68

1 ITA No. 7377/Del/2018 & 7977/Del/2018 Janak Crane P Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE

Janak Crane Pvt. Ltd., New Delhi vs. DCIT, Circle- 13(1), New Delhi

In the result, appeals filed by the assessee as well as the Revenue are allowed for

ITA 7377/DEL/2018[2013-14]Status: DisposedITAT Delhi29 Sept 2025AY 2013-14

Bench: Shri Anubhav Sharma & Shri Krinwant Sahayasstt. Yr: 2013-14

Section 144Section 194A(1)Section 36(1)(iii)Section 40Section 68

1 ITA No. 7377/Del/2018 & 7977/Del/2018 Janak Crane P Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE

Kapil Foods and Structures Private Limited, Warangal vs. DCIT., Circle-3(1), Hyderabad

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

ITA 206/HYD/2025[2017-18]Status: DisposedITAT Hyderabad26 Sept 2025AY 2017-18

Bench: Shri Ravish Sood & Shri Madhusudan Sawdiaआ.अपी.सं /Ita Nos.205 & 206/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2016-17 & 2017-18) M/S. Kapil Foods & Structures Dy. Commissioner Of Income Tax, Vs. Circle-3(1), Hyderabad. Pvt. Ltd., Warangal. Pan: Aacck2614F (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee By: Shri S. Rama Rao, Advocate रधजस् व द्वधरध/Revenue By: Dr. Sachin Kumar, Sr-Dr सुिवधई की तधरीख/Date Of Hearing: 02/09/2025 घोर्णध की तधरीख/Pronouncement: 26/09/2025 आदेश/Order Per Madhusudan Sawdia, A.M.: These Two Appeals Are Filed By M/S. Kapil Foods & Structures Pvt. Ltd. (“The Assessee”), Feeling Aggrieved By The Separate Orders Passed By The Learned Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi (“Ld. Cit(A)”), Both Dated 09.12.2024 For The A.Ys. 2016-17 & 2017-18. Since The Issues Involved In Both These Appeals Are Identical & Belong To The Same Assessee, One Consolidated Order Is Being Passed For The Sake Of Convenience & Brevity.

For Appellant: Shri S. Rama Rao, AdvocateFor Respondent: Dr. Sachin Kumar, SR-DR
Section 139Section 147Section 148Section 36(1)(iii)

funds available with the assessee are more than the amount of investment in non-current assets. Therefore, no addition can be made under section 36(1)(iii) of the Act in the hands of the ITA No.205/Hyd/2025 6 assessee. In support of his claim, the assessee relied on the decision

Kapil Foods and Structures Private Limited, Warangal vs. DCIT., Circle-3(1), Hyderabad

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

ITA 205/HYD/2025[2016-17]Status: DisposedITAT Hyderabad26 Sept 2025AY 2016-17

Bench: Shri Ravish Sood & Shri Madhusudan Sawdiaआ.अपी.सं /Ita Nos.205 & 206/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2016-17 & 2017-18) M/S. Kapil Foods & Structures Dy. Commissioner Of Income Tax, Vs. Circle-3(1), Hyderabad. Pvt. Ltd., Warangal. Pan: Aacck2614F (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee By: Shri S. Rama Rao, Advocate रधजस् व द्वधरध/Revenue By: Dr. Sachin Kumar, Sr-Dr सुिवधई की तधरीख/Date Of Hearing: 02/09/2025 घोर्णध की तधरीख/Pronouncement: 26/09/2025 आदेश/Order Per Madhusudan Sawdia, A.M.: These Two Appeals Are Filed By M/S. Kapil Foods & Structures Pvt. Ltd. (“The Assessee”), Feeling Aggrieved By The Separate Orders Passed By The Learned Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi (“Ld. Cit(A)”), Both Dated 09.12.2024 For The A.Ys. 2016-17 & 2017-18. Since The Issues Involved In Both These Appeals Are Identical & Belong To The Same Assessee, One Consolidated Order Is Being Passed For The Sake Of Convenience & Brevity.

For Appellant: Shri S. Rama Rao, AdvocateFor Respondent: Dr. Sachin Kumar, SR-DR
Section 139Section 147Section 148Section 36(1)(iii)

funds available with the assessee are more than the amount of investment in non-current assets. Therefore, no addition can be made under section 36(1)(iii) of the Act in the hands of the ITA No.205/Hyd/2025 6 assessee. In support of his claim, the assessee relied on the decision