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)

Mumbai Sez Ltd, Mumbai vs. DCIT Cen Cir 39, Mumbai

In the result, the appeals filed by the assessee are hereby partly allowed

ITA 4852/MUM/2014[2008-09]Status: DisposedITAT Mumbai01 Mar 2021AY 2008-09

Bench: Shri M. Balaganesh, Am & Shri Amarjit Singh, Jm आयकर अपील सं/ I.T.A. No. 4852/Mum/2014 (निर्धारण वर्ा / Assessment Year: 2008-09) & आयकर अपील सं/ I.T.A. No. 4853/Mum/2014 (निर्धारण वर्ा / Assessment Year: 2009-10) Mumbai Sez Limited बिधम/ Dcit, Central Circle-39 1St Floor, Jai Centre, 34 P. D. Aayakar Bhavan, Ground Vs. Mello Road, Opp. Red Gate, Floor, Mumbai-400020. Masjid, Mumbai-400009. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aabcg2739C (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee By: Shri Madhur Aggarwal Revenue By: Shri Rahul Raman (Dr) सुनवाई की तारीख / Date Of Hearing: 03/12/2020 घोषणा की तारीख /Date Of Pronouncement: 01/03/2021 आदेश / O R D E R Per Amarjit Singh, Jm: The Assessee Has Filed The Above Mentioned Appeals Against The Different Order Passed By The Commissioner Of Income Tax (Appeals)-41, Mumbai [Hereinafter Referred To As The “Cit(A)”] Relevant To The A.Ys. 2008-09 & 2009-10. Ita. No.4852/M/2014 2. The Assessee Has Filed The Present Appeal Against The Order Dated 31.01.2014 Passed By The Commissioner Of Income Tax (Appeals)-41

For Appellant: Shri Madhur AggarwalFor Respondent: Shri Rahul Raman (DR)
Section 143(2)Section 14ASection 57

Essar House Ltd, Mumbai vs. Asst CIT (Cir) 6(2)(2), Mumbai

In the result the appeal of the revenue is dismissed

ITA 1930/MUM/2018[2014-15]Status: DisposedITAT Mumbai11 Dec 2020AY 2014-15

Bench: Shri Rajesh Kumar & Shri Ravish Soodassessment Year: 2014-15 M/S. Essar House Ltd., Asst Cit (Cir) 6(2)(2), Essar House, R.No.504, 5Th Floor, 11 K.K. Marg, Vs. Aayakar Bhavan, Mahalaxmi, M.K. Road, Mumbai – 400 034 Mumbai - 400020 Pan: Aaacj2883P (Appellant) (Respondent) Present For: Assessee By : Shri Vijay Mehta, A.R. & Shri Anuj Kisnadwala, A.R. Revenue By : Shri R. Manjunatha Swamy, D.R. Date Of Hearing : 23.10.2020 Date Of Pronouncement : 11.12.2020 O R D E R Per Rajesh Kumar: The Present Appeal Has Been Preferred By The Assessee Against The Order Dated 31.01.2018 Of The Commissioner Of Income Tax (Appeals) [Hereinafter Referred To As The Cit(A)] Relevant To Assessment Year 2014-15. 2. The Various Grounds Raised By The Assessee Are As Under: “1. The Cit (A) Has Erred In Confirming The Disallowance Of Interest Amount Payable Towards Defeasance Of Sales Tax Liability Amounting To Rs.226,07,45,800. 2. The Cit(A) Has Erred In Holding That Interest Liability Cannot Be Treated As Expenditure Incurred For The Purpose Of Earning Or Making Income By Way Of Discounting Charges On The Zero Coupon Bonds (Zcbs) & Consequently , The Same Is Not Eligible For Deduction U/S 57(Iii) Of The Act Against The Income By Way Of Discounting Charges On Zcbs. 3. The Cit(A) Erred In Holding That Transaction Is Not A Bonafide In Nature & Interest Liability Was Arisen From Adoption Of A Colorable Device By The Appellant For Avoidance Of Tax.

For Appellant: Shri Vijay Mehta, A.R. &For Respondent: Shri R. Manjunatha Swamy, D.R
Section 57