Section 240 of the Income Tax Act
Income-tax Act, 2025: s.435
Section 240 of the Income-tax Act, 1961 corresponds to section 435 (Refund on appeal, etc) of the Income-tax Act, 2025.
Read section 435 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 240 is CIT v. Associated Cables P. Ltd. (286 ITR 596), cited in 25 of the 50 judgments on BharatTax that turn on this section.
Leading authorities on Section 240
Retention money withheld by a contractee is not taxable in the year it is retained, but only in the year the obligations under the contract are fulfilled and the amount becomes due to the assessee.
Retention money is considered deferred payment and is not taxable in the year it is retained if it is contingent upon the satisfactory completion of the contract work and the assessee has no vested right to receive it.
For income to be considered accrued, the assessee must have a vested right to receive it, meaning it cannot be taxed until a dispute is settled.
Subsequent events do not affect tax liability for a past year; any loss arising from non-receipt of money becomes a capital loss in the year it becomes irrecoverable.
