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“section 40A(2)(b)”

DisallowancesSection 40A(2)(b)Section 40A(2)(b)622 judgments

The decision most relied on for section 40A(2)(b) is CIT v. Dalmia Cement (Bharat) Ltd. (254 ITR 377), cited in 417 judgments on BharatTax.

Leading authorities on section 40A(2)(b)

CIT v. Dalmia Cement (Bharat) Ltd.
254 ITR 377 · 2002 · High Court
417
citing judgments

When there is a nexus between an expenditure and the purpose of business, incurred on grounds of commercial expediency, the Revenue cannot question its reasonableness or assume the role of the businessman to compel profit maximization. This principle applies even if the business is not that of the assessee itself.

CIT v. Winsome Textile Industries Ltd.
319 ITR 204 · 2009 · High Court
378
citing judgments

Section 14A of the Income-tax Act, 1961, which disallows expenditure incurred in relation to exempt income, is not applicable if the assessee has not earned any exempt income in the relevant assessment year.

Biocon Ltd. v. DCIT
35 Taxmann.com 335 · 2013 · ITAT
322
citing judgments

The discount arising from the grant of Employee Stock Option Plans (ESOPs) is an allowable business expenditure under Section 37(1) of the Income-tax Act, 1961, as it is an ascertained liability, not a contingent one, and constitutes a revenue expense rather than a capital expense.

CIT v. Walchand & Co.
65 ITR 381 · 1967 · Supreme Court
314
citing judgments

The necessity and reasonableness of business expenditure, including the utilization of borrowed funds, must be judged from the perspective of a businessman based on commercial expediency, and cannot be dictated by revenue authorities. The onus is on the assessee to demonstrate the business purpose and commercial expediency.

India Cements Ltd. v. CIT
60 ITR 52 · 1966 · Supreme Court
247
citing judgments

Expenses incurred for obtaining a loan for the purpose of the assessee's business, such as debenture discount, bank guarantee charges, and stamp duty, are considered revenue expenditure. These liabilities, though potentially spread over time, are deductible as revenue expenses.

CIT v. Ankitech (P) Ltd.
340 ITR 14 · 2012 · High Court
202
citing judgments

Deemed dividend under section 2(22)(e) cannot be taxed in the hands of a non-shareholder. The Supreme Court confirmed this view, affirming the Delhi High Court's decision in Ankitech.

Challapalli Sugars Ltd. v. CIT
98 ITR 167 · 1975 · Supreme Court
185
citing judgments

Interest on borrowed capital utilized for acquiring a capital asset is capitalized until business commences. Once business is set up, this interest is deductible under section 36(1)(iii) even if the asset has not yet been put to use, accepting commercial accounting standards in the absence of contrary statutory provisions.

DCIT v. Core Health Care Ltd.
298 ITR 194 · 2008 · Supreme Court
165
citing judgments

Interest expenditure incurred for acquiring capital assets, even if capitalized in the books, is deductible if for the purpose of business. Section 36(1)(iii) is a self-contained code regarding such deductions.

Judgments citing section 40A(2)(b)

Proactive in & Out Advertising Private Limited, Mumbai vs. The Commissioner of Income Tax (Appeals)-26, New Delhi

Appeal is allowed

ITA 1025/DEL/2025[2020-21]Status: DisposedITAT Delhi15 Jan 2026AY 2020-21

Bench: Sh. Satbeer Singh Godara & Sh. Amitabh Shuklaita No. 1025/Del/2025 : Asstt. Year : 2020-21 Proactive In & Out Advertising Pvt. Vs Cit(A)-26, Ltd., B Wing, Samkeet Apartment, New Delhi Vileeparle (East), S.O. Mumbai, Maharashtra-400057 (Appellant) (Respondent) Pan No. Aaccp6306R Assessee By : None Revenue By : Ms. Ankush Kalra, Sr. Dr Date Of Hearing: 20.01.2026 Date Of Pronouncement: 20.01.2026 Order Per Satbeer Singh Godara: This Assessee’S Appeal For Assessment Year 2020-21, Arises Against The Cit(A)-26, New Delhi’S Order Dated 08.01.2025, In Proceedings U/S 143(3) Of The Income Tax Act, 1961 (In Short “The Act”).

For Appellant: NoneFor Respondent: Ms. Ankush Kalra, Sr. DR
Section 143(3)Section 40A(2)(b)

parte. 3. It next transpires during the course of hearing that the assessee/appellant is aggrieved against both the learned lower authorities’ action invoking section 40A(2)(b) salary disallowance to it’s director Ms. Veenu Jain amounting to Rs. 18,00,000/- as excessive or unreasonable; as the case ... marginal rate, the impugned disallowance is not maintainable being a revenue neutral case. We thus reverse both the learned lower authorities’ action invoking section 40A(2)(b) of the Act in the assessee’s case in very terms. 3 Proactive In & Out Advertising Pvt. Ltd. 6. This assessee’s appeal

Assisstant Commissioner of Income Tax, Jhandewalan Extn vs. Om Prakash Arora, Connaught Place

In the result, appeal of the Revenue vide ITA No

ITA 5031/DEL/2024[2015-16]Status: DisposedITAT Delhi09 Jan 2026AY 2015-16

Bench: Shri Anubhav Sharma & Shri Amitabh Shukla, Accountnat Member [Assessment Year: 2015-16] Assistant Commissioner Of Om Prakash Arora, Income Tax, Central Circle-01, M-3, Flat No.103, Avg Bhawan E-2, Jhandewalan Extn. Vs The Variety Books Depot. New Delhi-110055 Connaught Place, New Delhi-110001 Pan-Accpa9774F Assessee Revenue Cross Objection No.42/Del/2025 (Arising Out Of Ita No.5031/Del/2024) [Assessment Year: 2015-16] Om Prakash Arora, Assistant Commissioner Of Income M-3, Flat No.103, Avg Tax, Central Circle-01, Bhawan The Variety Books Vs E-2, Jhandewalan Extn. Depot. Connaught Place, New Delhi-110055 New Delhi-110001 Pan-Accpa9774F Assessee Revenue [Assessment Year: 2016-17] Assistant Commissioner Of Om Prakash Arora, Income Tax, Central Circle-01, M-3, Flat No.103, Avg Bhawan E-2, Jhandewalan Extn. Vs The Variety Books Depot. New Delhi-110055 Connaught Place, New Delhi-110001 Pan-Accpa9774F Assessee Revenue

Section 139(1)Section 143(3)Section 147Section 148Section 151

appellant, in that case, there was powers with the Assessing Officer to disturb the consideration received or paid. As per the provisions of section 40A(2)(b), if a higher consideration was paid for purchase, then the Assessing Officer could have made adjustment. However, in this case the transaction ... purchase by the appellant is not between the related parties and therefore, even the provision of section 40A(2)(b) would not be invoked by the Assessing Officer. 78 The other provision leading with charging of less consideration are contained in Chapter XA dealing with General Anti Avoidance Rules (GAAR

Assisstant Commissioner of Income Tax, Jhandewalan Extn vs. Om Prakash Arora, Connaught Place

In the result, appeal of the Revenue vide ITA No

ITA 5029/DEL/2024[2016-17]Status: DisposedITAT Delhi09 Jan 2026AY 2016-17

Bench: Shri Anubhav Sharma & Shri Amitabh Shukla, Accountnat Member [Assessment Year: 2015-16] Assistant Commissioner Of Om Prakash Arora, Income Tax, Central Circle-01, M-3, Flat No.103, Avg Bhawan E-2, Jhandewalan Extn. Vs The Variety Books Depot. New Delhi-110055 Connaught Place, New Delhi-110001 Pan-Accpa9774F Assessee Revenue Cross Objection No.42/Del/2025 (Arising Out Of Ita No.5031/Del/2024) [Assessment Year: 2015-16] Om Prakash Arora, Assistant Commissioner Of Income M-3, Flat No.103, Avg Tax, Central Circle-01, Bhawan The Variety Books Vs E-2, Jhandewalan Extn. Depot. Connaught Place, New Delhi-110055 New Delhi-110001 Pan-Accpa9774F Assessee Revenue [Assessment Year: 2016-17] Assistant Commissioner Of Om Prakash Arora, Income Tax, Central Circle-01, M-3, Flat No.103, Avg Bhawan E-2, Jhandewalan Extn. Vs The Variety Books Depot. New Delhi-110055 Connaught Place, New Delhi-110001 Pan-Accpa9774F Assessee Revenue

Section 139(1)Section 143(3)Section 147Section 148Section 151

appellant, in that case, there was powers with the Assessing Officer to disturb the consideration received or paid. As per the provisions of section 40A(2)(b), if a higher consideration was paid for purchase, then the Assessing Officer could have made adjustment. However, in this case the transaction ... purchase by the appellant is not between the related parties and therefore, even the provision of section 40A(2)(b) would not be invoked by the Assessing Officer. 78 The other provision leading with charging of less consideration are contained in Chapter XA dealing with General Anti Avoidance Rules (GAAR