Section 145 of the Income Tax Act

Income-tax Act, 2025: s.276

Section 145 of the Income-tax Act, 1961 corresponds to section 276 (Method of accounting) of the Income-tax Act, 2025.

Read section 276 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 145 is Kedarnath Jute Mfg. Co. Ltd. v. CIT (82 ITR 363), cited in 654 of the 1,584 judgments on BharatTax that turn on this section.

Leading authorities on Section 145

Kedarnath Jute Mfg. Co. Ltd. v. CIT
82 ITR 363 · 1971 · Supreme Court
654
citing judgments

Tax liability for an item of income or expenditure is determined solely by the provisions of the Income-tax Act. Entries in an assessee's books of account are not conclusive and do not govern the taxability or deductibility of an item, as the legal rights and obligations under the Act prevail.

United Commercial Bank v. CIT
240 ITR 355 · 1999 · Supreme Court
314
citing judgments

Liabilities accrued on a notional basis are allowable as deductions under the mercantile system of accounting even if their exact quantification or discharge is deferred to a future date or if the demand itself is disputed.

CIT v. Bilahari Investment (P) Ltd.
299 ITR 1 · 2008 · Supreme Court
206
citing judgments

The project completion method and the percentage of completion method are both recognized methods for recognizing income from real estate contracts.

CIT v. N.C. Budharaja & Co.
204 ITR 412 · 1993 · Supreme Court
164
citing judgments

The word 'production' has a wider connotation than 'manufacture'; every manufacture is production, but not every production amounts to manufacture. 'Production' includes bringing into existence new goods, by-products, or inter-products through a process, which may or may not be manufacture.

CIT v. UTI Bank Ltd.
32 Taxmann.com 370 · 2013 · High Court
131
citing judgments

If an assessee possesses sufficient interest-free funds, it is presumed that investments yielding exempt income were made from these funds, therefore disallowance of interest expenditure under Section 14A is not justified.

Bausch & Lomb Eye Care (India) Pvt. Ltd. v. Additional CIT
381 ITR 227 · 2016 · High Court
127
citing judgments

The existence of an international transaction must be established before its arm's length price can be determined. An alleged 'excessive' AMP expenditure cannot unilaterally expand the scope of an international transaction if its existence is contested.

CIT v. Vasisth Chay Vyapar Ltd.
330 ITR 440 · 2011 · High Court
125
citing judgments

Interest income is taxable under the mercantile system of accounting even if it is not actually recovered, provided there is a right to receive it. The decision also touches upon the treatment of bad debts and provisions for doubtful debts under Section 36(1)(viia).

CIT v. Woodward Governor India Pvt. Ltd.
294 ITR 451 · 2007 · High Court
120
citing judgments

The amendment to Section 43A of the Income Tax Act, 1961, is prospective and applies only from April 1, 2003. This means it governs changes in the actual cost of assets due to exchange rate fluctuations from that date onwards.

CIT v. Vijaya Bank
187 ITR 541 · 1991 · Supreme Court
116
citing judgments

The 'broken period interest' paid on securities is considered part of the capital outlay for acquiring those securities and cannot be allowed as a revenue expenditure or business deduction. It must be capitalized.

CIT v. Rao Bahadur Calavala Cunnan Chetty Charities
135 ITR 485 · 1982 · High Court
98
citing judgments

The income of a charitable trust, particularly income from property held under trust, for the purpose of claiming exemption under Section 11, must be computed in a normal commercial manner, without strict reference to the computation provisions for different heads of income like Section 14 or Section 24(a). This approach ensures that the income available for application or accumulation is assessed on commercial principles.

Judgments on Section 145