Section 57(iii) of the Income Tax Act

Income-tax Act, 2025: s.93

Section 57(iii) falls under section 57 of the Income-tax Act, 1961, which corresponds to section 93 (Deductions) of the Income-tax Act, 2025.

Read section 93 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 57(iii) is CIT v. Rajendra Prasad Moody (115 ITR 519), cited in 386 of the 716 judgments on BharatTax that turn on this section.

Leading authorities on Section 57(iii)

CIT v. Rajendra Prasad Moody
115 ITR 519 · 1978 · Supreme Court
386
citing judgments

For deductions under Section 57(iii) relating to "Income from Other Sources," an expenditure is allowable if it is laid out wholly and exclusively for the purpose of making or earning such income, even if no income is actually earned in that previous year.

Shambhu Investment (P) Ltd. v. CIT
263 ITR 143 · 2003 · Supreme Court
181
citing judgments

Income derived from letting out property along with incidental use of furniture, fixtures, and common facilities is assessable as 'income from house property' and not 'business income' when the prime object is merely to let out and not to exploit the property as a business asset.

Totgars Co-operative Sale Society Ltd. v. ITO
58 Taxmann.com 35 · 2015 · High Court
114
citing judgments

When a co-operative society earns interest on deposits with scheduled banks, this income is assessable under "Income from other sources" (Section 56), and the society is entitled to deduct related administrative and proportionate expenses under Section 57 to tax only the net interest income.

Chelmsford Club v. CIT
243 ITR 89 · 2000 · Supreme Court
100
citing judgments

Income arising from mutual activities carried out by clubs or associations solely among their members is not assessable for income tax, as it does not constitute income from a trade or business due to the principle of mutuality.

CIT v. V.P. Gopinathan
248 ITR 449 · 2001 · Supreme Court
66
citing judgments

Interest paid on a loan taken against the security of a fixed deposit cannot be set off against or reduced from the interest income earned on that fixed deposit. The Income-tax Act does not permit such netting.

Punjab Stainless Steel Inds v. CIT
324 ITR 396 · 2010 · High Court
66
citing judgments

This case establishes that merely having sufficient interest-free own funds does not automatically prevent interest disallowance on interest-free advances; the assessee must affirmatively prove the business or commercial expediency of such advances.

79 Taxman 378/216 ITR 548 (Bom.) 4. CIT v. Macbrout Engineering (P.) Ltd.
52 Taxmann.com 219 · 2014 · High Court
43
citing judgments

If the Revenue accepts the Tribunal's decision for earlier years without challenge, it cannot assail the same decision in subsequent years, provided the facts are similar.

CIT v. Amritaben R. Shah
238 ITR 777 · 1999 · High Court
37
citing judgments

Expenditure incurred to acquire controlling interest in a company, rather than to earn dividend income, is not allowable as a deduction under section 57(iii) as it is in the nature of capital expenditure.

BSES Rajdhani Power Ltd. v. PCIT
399 ITR 228 · 2017 · High Court
30
citing judgments

Revision under Section 263 is justified when the Assessing Officer fails to consider a significant portion of a claim, such as depreciation, leading to an erroneous assessment that is prejudicial to the revenue.

CIT v. Rampur Timber & Turnery Co. Ltd.
129 ITR 58 · 1981 · High Court
28
citing judgments

Expenditure incurred for the purpose of earning income is deductible under Section 57(iii) even if no income is actually earned. The earning of income is not a pre-condition for allowing the deduction.

Judgments on Section 57(iii)

Mayavan Shanthi, Namakkal vs. ITO, Ward - 1, Namakkal

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

ITA 530/CHNY/2022[2011-12]Status: DisposedITAT Chennai10 Mar 2023AY 2011-12

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./I.T.A. No.530/Chny/2022 िनधा"रण वष"/Assessment Year: 2011-12 Smt. Mayavan Shanthi, The Income Tax Officer, 65, Rangar Sannathi Street, Vs. Ward 1, Namakkal, Tamil Nadu 637 001. Namakkal. [Pan: Acsps8564R] (अपीलाथ" /Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By Shri S. Sridhar, Advocate [Erode] : ""थ" की ओर से/Respondent By Shri P. Sajit Kumar, Jcit : सुनवाई की तारीख/ Date Of Hearing 07.03.2023 : घोषणा की तारीख /Date Of Pronouncement : 10.03.2023 आदेश /O R D E R Per V. Durga Rao: This Appeal Filed By The Assessee Is Against The Order Of The Ld. Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre [Nfac], Delhi Dated 06.06.2022, Relevant To The Assessment Year 2011–12. 2. Brief Facts Of The Case Are That The Assessee Filed Her Return Of Income For The Assessment Year 2011-12 On 30.03.2012 Admitting An Income Of ₹.1,66,600/- After Deduction Under Section 80C Of The Income Tax Act, 1961 [“Act” In Short]. While Computing The Income, The Assessee Has Claimed Large Interest Expenses Paid To The Husband Of The Assessee

Section 143(2)Section 143(3)Section 148Section 57Section 80C

Malavally Taluk Sri Basaveshwara Credit Co-Operative Society Limited, Mandya vs. Income Tax Officer, Ward-1 & Tps, Mandya

In the result, appeal of the assessee is partly allowed

ITA 1019/BANG/2022[2016-17]Status: DisposedITAT Bangalore24 Nov 2022AY 2016-17

Bench: Shri N. V. Vasudevanassessment Year : 2016-17 M/S. Malavally Taluk Sri Vs. The Ito, Basaveshwara Credit Cooperative Ward – 1 & Tps, Society Ltd., Mandya. Kote Beedi, Malavalli, Mandya – 571 430. Pan : Afepa 6862 R Appellant Respondent Assessee By : Shri. Siddesh Nagaraj Gaddi, Ca Revenue By : Shri. Ganesh R. Ghale, Standing Counsel Date Of Hearing : 23.11.2022 Date Of Pronouncement : 24.11.2022 O R D E R This Is An Appeal By The Assessee Directed Against The Order Dated 20.06.2022 By The Nfac, Delhi Relating To Assessment Year 2016-17. 2. The Assessee Is A Credit Co-Operative Society. In The Assessment Of The Assessee For Assessment Year 2016-17, The Assessment Was Completed Under Section 143(3) By An Order Dated 28.12.2018. The Assessee Earned Interest Income Of Rs.3,20,999/- Being Interest Earned On Deposits With The Co-Operative Bank. The Assessee Claimed The Same As Deduction Under Sections 80P(2)(A)(I)/80P(2)(D) Of The Income Tax Act, 1961 (Hereinafter Called ‘The Act’). Deduction Under Sections 80P(2)(A)(I)/80P(2)(D) Was Denied By The Ao By Following The Decision Of Hon’Ble Karnataka High Court In The Case Of Pcit Vs. Totagar’S Co-Operative Society (2017) 83 Taxmann 140 (Karnataka) Wherein It Was Held That Interest Earned On Page 2 Of 3

For Appellant: Shri. Siddesh Nagaraj Gaddi, CAFor Respondent: Shri. Ganesh R. Ghale, Standing Counsel
Section 143(3)Section 57Section 80PSection 80P(2)(a)Section 80P(2)(d)