Dividend/interest income not profit ‘derived’ from business, ineligible for Section 36(1)(viii) deduction claim

In a judgment pronounced on 10.12.2025, Supreme Court dismisses assessee’s (National Cooperative Development Corporation) SLP against Delhi High Court judgment on the issue of dividend in respect of redeemable preference shares/interest on short-term deposits being eligible for deduction under section 36(1)(viii) of Income tax Act; Delhi High Court held that investment in redeemable preference shares cannot be considered as a loan or advance made by the assessee to the company for interest and hence rejected assessee's argument that dividend received on redeemable preference shares amounts to profits ‘derived’ from providing long-term finance (within the meaning of section 36(1)(viii) of the Act r/w clause (h) of the Explanation to the section); High Court applied the same rationale with regards to interest on short term deposits with banks as also service charges on SDF loans (where loans are not provided by the assessee but are given by the Government through the assessee for which service charges are paid) and rejected the assessee's claim of Section 36(1)(viii) deduction; Supreme Court, vide a speaking order, rules in Revenue's favour and against assessee.