Section 35(1)(ii) of the Income Tax Act
Income-tax Act, 2025: s.45
Section 35(1)(ii) falls under section 35 of the Income-tax Act, 1961, which corresponds to section 45 (Expenditure on scientific research) of the Income-tax Act, 2025.
Read section 45 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 35(1)(ii) is ACIT v. ICICI Securities Primary Dealership Ltd. (348 ITR 299), cited in 76 of the 329 judgments on BharatTax that turn on this section.
Leading authorities on Section 35(1)(ii)
Reopening assessment based on a mere re-look of accounts already furnished and assessed under section 143(3) is not permissible if there was no failure on the part of the assessee to make a true and full disclosure. The assessment cannot be reopened on the ground that income has escaped assessment merely by re-examining previously filed accounts.
The Supreme Court held that discount on the issue of debentures is a deductible expenditure that can be spread proportionately over the period for which the debentures remain outstanding, rather than being claimed entirely in the year of issue. This treatment acknowledges the enduring benefit derived from the funds raised through debentures.
Capital expenditure incurred by a trust from its own funds is considered an application of income, entitling the trust to claim exemption under Section 11(1) of the Income-tax Act.
The power to cancel registration granted to a trust is not an implied power under the General Clauses Act and requires express legislative provision. An express power to cancel registration was introduced later via amendment.
Fresh legal claims can be made during assessment or appellate proceedings, and the Assessing Officer should consider these claims for correct deductions after verification.
A donor cannot be held responsible for the utilization of their donation by a donee institution once the statutory conditions for claiming a deduction are met. Subsequent withdrawal of approval for the donee institution cannot retrospectively deny the donor the deduction.
The Tribunal has comprehensive jurisdiction to deal with issues in an appeal and can allow a new ground to be raised, assimilating issues from the CIT (Appeals) order.
Disallowance under Section 40A(2)(b) is not maintainable when both the payer and payee are assessed at the maximum marginal rate, as it results in a revenue-neutral situation.
A High Court cannot cancel the registration of a scientific research association retrospectively. Therefore, a deduction claimed under section 35(1)(ii) based on such a cancelled registration must be allowed.
Interest paid on delayed remittances of service tax is compensatory in nature and not a penalty hit by the Explanation to Section 37(1) of the Income Tax Act, 1961, making it a allowable business expenditure.
