Section 10(2) of the Income Tax Act
Income-tax Act, 2025: s.11
Section 10(2) falls under section 10 of the Income-tax Act, 1961, which corresponds to section 11 (Incomes not included in total income) of the Income-tax Act, 2025.
Read section 11 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 10(2) is Western India Vegetable Products Ltd. v. CIT (26 ITR 151), cited in 108 of the 37 judgments on BharatTax that turn on this section.
Leading authorities on Section 10(2)
Revenue expenditure incurred after a business is set up and ready to commence, but before its actual commencement, is allowable as a deduction even if no income is earned in that period. The previous year for a business begins from the date it is set up.
Penalty under Section 271D for cash loans in contravention of Section 269SS is not leviable when transactions are genuine and bonafide. This is particularly applicable for transactions between close relatives where a reasonable explanation exists for not using an account payee cheque or DD.
Loss arising from non-recovery of loans given to employees is treated as a loss incidental to business activity, making any interest on such loans fall within the purview of business income, not income from other sources.
For a bad debt to be allowed as a write-off, it is sufficient for the assessee to establish that the debt has been written off in its books of accounts, as per Section 36(1)(vii) of the Income Tax Act, 1961.
Expenses incurred prior to business commencement but after business setup are deductible as revenue expenses, as the setting up and commencement dates of a business are not necessarily the same.
The setting up of a business and the commencement of a business are distinct events and do not necessarily occur on the same date. Expenses incurred before the commencement of business but after the setting up of business may be considered for determining profits.
If the Tribunal finds that a transaction is genuine based on the facts, that finding is a finding of fact, and no substantial question of law arises, particularly regarding penalties under Section 271D or 271E.
Advances given to employees that become unrecoverable are treated as a business loss deductible under Section 28 of the Income-tax Act. Ex-gratia payments to staff can also be deductible under Section 37(1).
