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)

Stella D Souza, Mumbai vs. ITO Ward 31(2)(1), Mumbai

In the result, the Assessee’s appeal is allowed for statistical purposes

ITA 5719/MUM/2025[2013-14]Status: DisposedITAT Mumbai27 Nov 2025AY 2013-14

Bench: Shri Narender Kumar Choudhryassessment Year: 2013-14 Ms. Stella D Souza, Ito 31(2)(1), B/102 Diptigreen, Kautilya Bhavan Opp Bombay Cambridg School Vs. Bandra Kurla Complex, Chakala, Andheri (E), Bandra (E), Mumbai – 400 099 Mumbai - 400099 Pan: Acjpd4624Q (Appellant) (Respondent) Present For: Assessee By : Shri S.C. Agarwal, Ld. A.R. Revenue By : Shri Praveen K. Srivastav, Ld. Sr. D.R. Date Of Hearing : 17.11.2025 Date Of Pronouncement : 27.11.2025 O R D E R Per : Narender Kumar Choudhry: This Appeal Has Been Preferred By The Assessee Against The Order Dated 28.03.2025, Impugned Herein, Passed By The Ld. Commissioner Of Income Tax (Appeals) Addl/Jcit(A) (In Short Ld. Commissioner) U/S 250 Of The Income Tax Act, 1961 (In Short ‘The Act’) For The A.Y. 2013-14. 2. In This Case, The Assessee Being An Individual & Director In M/S. Silver Global Services Pvt. Ltd. Had Earned Interest Income Of Rs.6,48,842/- From Fixed Deposits With Model Co-Operative Bank Ltd. & In Order To Avoid Premature Encashment Of Fd Had Taken Loan Against Such Fd From Model Co-Operative Bank Ltd. & Paid Interest To The Said Bank To The Tune Of Rs.8,39,626/- & Since The Interest Paid Was More Than The Interest Received, Therefore, Has Not Shown Such Interest Earned.

For Appellant: Shri S.C. Agarwal, Ld. A.RFor Respondent: Shri Praveen K. Srivastav, Ld. Sr. D.R
Section 147Section 148Section 250