Section 35AD of the Income Tax Act
Income-tax Act, 2025: s.46
Section 35AD of the Income-tax Act, 1961 corresponds to section 46 (Capital expenditure of specified business) of the Income-tax Act, 2025.
Read section 46 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 35AD is Redington (India) Ltd. v. Addl. CIT (77 Taxmann.com 257), cited in 370 of the 85 judgments on BharatTax that turn on this section.
Leading authorities on Section 35AD
No disallowance under Section 14A can be made in the absence of actual exempt income, as Section 14A relates to the earning of actual income, not notional or anticipated income, thereby declining to apply the CBDT Circular dated 11th May 2014 in such cases.
When tax is levied under Section 115JB on book profits, no penalty under Section 271(1)(c) for concealment or furnishing inaccurate particulars can be imposed based on additions or disallowances made in the regular computation of income. The regular computation is only for comparative purposes when the final tax liability is based on book profits.
An assessee has the option to choose either the Discounted Cash Flow (DCF) method or the Net Asset Value (NAV) method for share valuation under Section 56(2)(viib) read with Rule 11UA. The Assessing Officer cannot substitute the chosen method or value without identifying a specific error in the assessee's valuation.
Section 14A, read with Rule 8D, does not apply if no exempt income was earned or is receivable in the relevant assessment year. Amendments to Section 14A are generally clarificatory and applied prospectively.
Goodwill arising on amalgamation is an intangible asset qualifying for depreciation under Section 32 of the Income Tax Act.
Depreciation on goodwill arising from amalgamation is not admissible to the amalgamated company if no goodwill was admitted in the hands of the amalgamating company, applying Explanation 7 to Section 43(1) and the Sixth Proviso to Section 32(1)(ii).
An Income Tax Appellate Tribunal, regardless of its location, must respect a High Court's decision from another state, provided no contrary High Court decision exists. This principle applies to following established precedents.
Disallowance under Section 14A cannot be made in the absence of any exempt income earned by the assessee. The High Court upheld the ITAT order, and the Supreme Court rejected the departmental SLP.
A scheme of amalgamation, once sanctioned by a court, has statutory operation and is distinct from a mere agreement, being final and binding on all parties, including statutory authorities.
Interest earned on funds parked in fixed deposits is considered business income if it's intrinsically linked to the assessee's business activities.
