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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)

The Dy. Commissioner of Income Tax, Central Circle-5(3), Mumbai vs. Underwater Services Company Ltd, Mumbai

In the result, appeal is dismissed

ITA 2342/MUM/2023[2018-2019]Status: DisposedITAT Mumbai30 Jun 2025AY 2018-2019

Bench: Shri Saktijit Dey, Vp & Shri N.K. Billaiya, Am Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Room No. 1906, 19Th Floor, Road, Mazgaon, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Road, Mazgaon, Room No. 1906, 19Th Floor, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K

For Appellant: Shri Ajay R Singh/Akshy PawarFor Respondent: Shri Arun Kanti Datta, (CIT-DR)
Section 132Section 143(3)Section 153ASection 40A(2)(b)

notice to the assessee to explain why the excess payment made to the related party should not be disallowed in terms of with Section 40A(2)(b) of the Act. In reply, though, the assessee filed a detailed submission objecting to the proposed disallowance, however, the AO was not convinced ... 2342/Mum/2023 Underwater Services Company Ltd. the factual position emerging on record, we do not find any justifiable reason for invoking the provision of Section 40A(2)(b) of the Act which postulates that in case assessee incurs any expenditure by way of payment made to any related party, which

The Dy. Commissioner of Income Tax, Central Circle -5(3), Mumbai vs. Underwater Services Company Ltd, Mumbai

In the result, appeal is dismissed

ITA 2341/MUM/2023[2017-2018]Status: DisposedITAT Mumbai30 Jun 2025AY 2017-2018

Bench: Shri Saktijit Dey, Vp & Shri N.K. Billaiya, Am Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Room No. 1906, 19Th Floor, Road, Mazgaon, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Road, Mazgaon, Room No. 1906, 19Th Floor, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K

For Appellant: Shri Ajay R Singh/Akshy PawarFor Respondent: Shri Arun Kanti Datta, (CIT-DR)
Section 132Section 143(3)Section 153ASection 40A(2)(b)

notice to the assessee to explain why the excess payment made to the related party should not be disallowed in terms of with Section 40A(2)(b) of the Act. In reply, though, the assessee filed a detailed submission objecting to the proposed disallowance, however, the AO was not convinced ... 2342/Mum/2023 Underwater Services Company Ltd. the factual position emerging on record, we do not find any justifiable reason for invoking the provision of Section 40A(2)(b) of the Act which postulates that in case assessee incurs any expenditure by way of payment made to any related party, which

The Dy. Commissioner of Income Tax, Central Circle-5 (3), Mumbai vs. Underwater Services Company Ltd, Mumbai

In the result, appeal is dismissed

ITA 2340/MUM/2023[2012-13]Status: DisposedITAT Mumbai30 Jun 2025AY 2012-13

Bench: Shri Saktijit Dey, Vp & Shri N.K. Billaiya, Am Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Room No. 1906, 19Th Floor, Road, Mazgaon, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Road, Mazgaon, Room No. 1906, 19Th Floor, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K

For Appellant: Shri Ajay R Singh/Akshy PawarFor Respondent: Shri Arun Kanti Datta, (CIT-DR)
Section 132Section 143(3)Section 153ASection 40A(2)(b)

notice to the assessee to explain why the excess payment made to the related party should not be disallowed in terms of with Section 40A(2)(b) of the Act. In reply, though, the assessee filed a detailed submission objecting to the proposed disallowance, however, the AO was not convinced ... 2342/Mum/2023 Underwater Services Company Ltd. the factual position emerging on record, we do not find any justifiable reason for invoking the provision of Section 40A(2)(b) of the Act which postulates that in case assessee incurs any expenditure by way of payment made to any related party, which

Underwater Services Company Ltd, Mumbai Suburban vs. Dy. Commissioner of Income Tax Central Circle 5(3), Mumbai

In the result, appeal is dismissed

ITA 2265/MUM/2023[2012-13]Status: DisposedITAT Mumbai30 Jun 2025AY 2012-13

Bench: Shri Saktijit Dey, Vp & Shri N.K. Billaiya, Am Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Room No. 1906, 19Th Floor, Road, Mazgaon, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Road, Mazgaon, Room No. 1906, 19Th Floor, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K

For Appellant: Shri Ajay R Singh/Akshy PawarFor Respondent: Shri Arun Kanti Datta, (CIT-DR)
Section 132Section 143(3)Section 153ASection 40A(2)(b)

notice to the assessee to explain why the excess payment made to the related party should not be disallowed in terms of with Section 40A(2)(b) of the Act. In reply, though, the assessee filed a detailed submission objecting to the proposed disallowance, however, the AO was not convinced ... 2342/Mum/2023 Underwater Services Company Ltd. the factual position emerging on record, we do not find any justifiable reason for invoking the provision of Section 40A(2)(b) of the Act which postulates that in case assessee incurs any expenditure by way of payment made to any related party, which

Underwater Services Company Limited, Mumbai vs. Dy. Commissioner of Income Tax Central Circle 5(3), Mumbai

In the result, appeal is dismissed

ITA 2264/MUM/2023[2017-2018]Status: DisposedITAT Mumbai30 Jun 2025AY 2017-2018

Bench: Shri Saktijit Dey, Vp & Shri N.K. Billaiya, Am Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Room No. 1906, 19Th Floor, Road, Mazgaon, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K Underwater Services Company Ltd., Dy. Commissioner Of Income Tax, 23/24, Mbpt Building, Malet Bunder Central Circle 5(3), Road, Mazgaon, Room No. 1906, 19Th Floor, Vs. Mumbai- 400009 Air India Building, Nariman Point, Mumbai- 400021 (Appellant) : (Respondent) Pan No. Aabcu 0302K

For Appellant: Shri Ajay R Singh/Akshy PawarFor Respondent: Shri Arun Kanti Datta, (CIT-DR)
Section 132Section 143(3)Section 153ASection 40A(2)(b)

notice to the assessee to explain why the excess payment made to the related party should not be disallowed in terms of with Section 40A(2)(b) of the Act. In reply, though, the assessee filed a detailed submission objecting to the proposed disallowance, however, the AO was not convinced ... 2342/Mum/2023 Underwater Services Company Ltd. the factual position emerging on record, we do not find any justifiable reason for invoking the provision of Section 40A(2)(b) of the Act which postulates that in case assessee incurs any expenditure by way of payment made to any related party, which