Section 31 of the Income Tax Act
Income-tax Act, 2025: s.28
Section 31 of the Income-tax Act, 1961 corresponds to section 28 (Rent, rates, taxes, repairs and insurance) of the Income-tax Act, 2025.
Read section 28 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 31 is Ghanashyam Mishra And Sons. v. Edelweiss Asset Reconstruction (126 Taxmann.com 132), cited in 192 of the 329 judgments on BharatTax that turn on this section.
Leading authorities on Section 31
Once a resolution plan is approved under Section 31(1) of the IBC, claims not included in the plan are extinguished and cannot be pursued. This applies to statutory dues owed to the government and other authorities.
Expenditure for replacement of machinery parts qualifies as 'current repairs' under Section 31(i) of the Income-tax Act if it does not result in a new asset or substantially enhance the existing asset's life. For Section 31(i), the critical factor is whether the expense constitutes current repairs, making the general revenue vs. capital distinction less relevant for that specific section.
Expenditure qualifies as 'current repairs' if it maintains existing machinery without replacement, creates no new asset, restores functional efficiency without increasing capacity, and is not an independent unit. Conversely, the cost of replacing machinery, especially independent units, constitutes capital expenditure.
All claims, including statutory dues, that predate the approval of a resolution plan under the IBC stand extinguished by operation of law. No proceedings can be initiated or continued for such claims if they are not part of the approved plan.
The moratorium period under the Insolvency and Bankruptcy Code, 2016, will be excluded when calculating the limitation period for proceedings involving a corporate debtor. The Assessing Officer can seek re-institution of an appeal if the resolution process concludes.
The High Court's direction to the CIT(Appeals) to consider specific Supreme Court judgments implies that cases may be decided on merits by appellate authorities based on relevant precedents without necessarily remanding them to the Assessing Officer.
Income tax proceedings initiated against a corporate debtor under section 148 for assessment years prior to the approval of a resolution plan under the Insolvency and Bankruptcy Code (IBC) are invalid, as the IBC aims to provide certainty by extinguishing all claims not part of the resolution plan.
Expenditure incurred on Corporate Social Responsibility (CSR) cannot be allowed as a deduction under Section 37(1) of the Income-tax Act, 1961, following Explanation 2 to Section 37(1) introduced by Finance Act No. 2 of 2014.
Appeals filed by a corporate debtor before the Tribunal are dismissed as infructuous when proceedings cannot continue against the corporate debtor after an NCLT order, due to the moratorium period under the IBC Code.
Proceedings against a corporate debtor cannot continue after an order by the NCLT initiating Corporate Insolvency Resolution Process (CIRP) under the Insolvency & Bankruptcy Code, 2016.
