तृतीया तत्कृतार्थेन गुणवचनेन

A word ending with the Instrumental -3rd case-affix is optionally compounded with what denotes quality, the quality being that which is instrumentally caused by the thing signified by what ends with the 3rd case-affix and with the word अर्थ 'wealth' and the resulting compound is तत्-पुरुष ।
The words सुप्, सुपा are understood here: and the whole of this sutra is an epithet of those words. A noun in the instrumental case is compounded with a word expressing quality, and with the word अर्थः provided that the word expressing quality is itself the result produced by the sense of the word in the instrumental case शङ्कुलयाखण्डः शङ्कुलाखण्डः 'cut by nipper' किरिकाणः 'made blind of one eye by a hog' धान्यार्थः 'wealth acquired by grain.' For accent of these words see 6.2.2

Why do we say 'when caused by the word in the instrumental case'? Observe अक्ष्णा काणः 'blind of one eye.' Here अक्ष्णा in the 3rd case is not the instrumental cause that produced blindness and hence no compounding.

Why do we say 'a word expressing quality ?' Observe :- गोभिर्वपावान् 'sowing with the cows.' Here though 'sowing' is instrumentally caused by the Cows, yet it does not qualify cows but the sower, and hence no compounding.

Guna-vachanas are those words which, not being words formed by primary or secondary affixes, or other words entitled to the name of samkhya, or sarvanama, or jati, or compound words, are words denoting qualities and capable of being used as adjectives qualifying substantives.