Section 10(35) of the Income Tax Act
Income-tax Act, 2025: s.11
Section 10(35) 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(35) is CIT v. Walfort Share & Stock Brokers (P.) Ltd. (326 ITR 1), cited in 543 of the 196 judgments on BharatTax that turn on this section.
Leading authorities on Section 10(35)
For attracting Section 14A disallowance, there must be a proximate cause relating the expenditure to actual tax-exempt income, and such disallowance is not automatic but requires positive material. Additionally, Section 94(7) on dividend stripping only ignores losses to the extent of dividend received for assessment years post-April 1, 2002, allowing the remaining loss.
A provision for doubtful debts cannot be added back while computing book profits under Section 115JB of the Income-tax Act for Minimum Alternate Tax (MAT) purposes.
Violation of investment mandates under Section 13(1)(d) of the Income Tax Act, 1961, for a charitable trust results in the complete denial of exemption under Section 11 of the Act.
A transfer pricing adjustment for corporate guarantees provided by an Indian entity to its Associated Enterprises (AEs) where no fees are charged can be estimated at approximately 0.20%. The arm's length principle applies to such intra-group corporate guarantee transactions.
Losses arising from the conversion of foreign currency or from foreign exchange forward contracts entered into for business transactions, such as hedging export proceeds, are considered revenue or trading losses and are deductible as business expenditure under Section 37(1). The amortization of premium paid on such foreign exchange contracts is also an allowable deduction.
For banks, the computation of bad debt allowance under sections 36(1)(vii) or 36(1)(viia) must be restricted to only incremental advances, rejecting broader interpretations by tax authorities.
When a partnership firm takes over the business of an earlier firm, all assets and liabilities transfer to the new firm. The deduction for bad debts is available to the assessee on the total amount written off, even if part of the debt (interest) was offered to tax in earlier years.
The Assessing Officer must record their dissatisfaction with the correctness of an assessee's claim regarding expenditure in relation to exempt income, providing cogent reasons, before invoking Section 14A and Rule 8D for disallowance.
Additional depreciation under Section 32(1)(iia) can be claimed in the year an asset is acquired and installed, even if it is claimed in a subsequent year of acquisition and installation.
