Section 35D of the Income Tax Act

Income-tax Act, 2025: s.44

Section 35D of the Income-tax Act, 1961 corresponds to section 44 (Amortisation of certain preliminary expenses) of the Income-tax Act, 2025.

Read section 44 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 35D is CIT v. Dalmia Cement (Bharat) Ltd. (254 ITR 377), cited in 417 of the 595 judgments on BharatTax that turn on this section.

Leading authorities on Section 35D

CIT v. Dalmia Cement (Bharat) Ltd.
254 ITR 377 · 2002 · High Court
417
citing judgments

When there is a nexus between an expenditure and the purpose of business, incurred on grounds of commercial expediency, the Revenue cannot question its reasonableness or assume the role of the businessman to compel profit maximization. This principle applies even if the business is not that of the assessee itself.

Additionally, in CIT v. A. Raman & Co.
67 ITR 11 · 1968 · Supreme Court
321
citing judgments

The mere lawful reorganization of a business transaction does not automatically imply an intent to evade tax, and genuine business adjustments should not be considered suppressive actions without clear evidence of such intent.

Saurashtra Cement and Chemical Industries Ltd. v. CIT
213 ITR 523 · 1995 · High Court
311
citing judgments

Expenditure is deductible in the year it is determined and crystallised as a liability, even if it relates to a transaction of an earlier year, provided accounts are maintained on a mercantile basis.

Alembic Chemical Works Co. Ltd. v. CIT
177 ITR 377 · 1989 · Supreme Court
275
citing judgments

Expenditure that provides a commercial advantage of an enduring nature may still be classified as revenue expenditure if its purpose is to facilitate existing trading operations, improve business efficiency, or upgrade existing products, depending on the specific context and objective.

Brooke Bond India Ltd. v. CIT
225 ITR 798 · 1997 · Supreme Court
228
citing judgments

Expenditure incurred for increasing a company's share capital or expanding its capital base, such as expenses related to the issue of shares, constitutes capital expenditure. Such expenses are not deductible as revenue expenditure under Section 37(1) of the Income-tax Act, 1961, even if they incidentally benefit the business.

Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT
340 ITR 477 · 2012 · High Court
213
citing judgments

If unabsorbed depreciation or losses from years prior to the initial assessment year for Section 80-IA claim have already been set off against other income, they cannot be notionally carried forward again to reduce the profits of the eligible unit for computing deduction under Section 80-IA. The notional carry forward provision under Section 80-IA(5) applies only to unabsorbed depreciation or losses that have not yet been absorbed.

CIT v. Lakshmi Machine Works
290 ITR 667 · 2007 · Supreme Court
163
citing judgments

Excise duty collected by the assessee as an agent on behalf of the government is not includible in the total turnover for the purpose of computing deduction under section 80HHC.

Punjab State Industrial Development Corporation Ltd. v. CIT
225 ITR 792 · 1997 · Supreme Court
158
citing judgments

Expenditure incurred for increasing a company's share capital, such as expenses related to issuing shares or an initial public offering (IPO), is capital expenditure. Such expenses are not allowable as a revenue deduction under Section 37, even if they incidentally benefit the business, because they result in an increase in capital.

CIT v. K.V. Pilliah and Sons.
63 ITR 411 · 1967 · Supreme Court
97
citing judgments

The Income Tax Appellate Tribunal is not required to repeat its reasons when it fully agrees with the conclusions of the lower appellate authority and has no further grounds to add, even as the final fact-finding body.

CIT v. Bharti Televenture Ltd.
331 ITR 502 · 2011 · High Court
89
citing judgments

Interest expenditure cannot be disallowed under Section 36(1)(iii) for interest-free advances made to subsidiaries or group companies if the advances are from owned funds or are justified by commercial expediency.

Judgments on Section 35D

Topmost Dealmark Pvt. Ltd., Kolkata vs. ITO, Ward 9(1), Kolkata

In the result, appeal of the assessee is allowed for statistical purposes

ITA 540/KOL/2024[2012-13]Status: DisposedITAT Kolkata12 Jun 2024AY 2012-13

Bench: Dr. Manish Borad, Hon’Ble & Shri Pradip Kumar Choubey, Hon’Blei.T.A. No. 540/Kol/2024 Assessment Year: 2012-13 Topmost Dealmark Pvt. Ltd. Income Tax Officer, Ward – 9(1), 5/1, 4Th Floor Vs Kolkata Room No. 125, Clive Row Kolkata - 700001 [Pan : Aaect0270C] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri Siddarth Agarwal, Advocate Revenue By : Shri Abhijit Kundu, Addl. Cit D/R सुनवाई क" तारीख/Date Of Hearing : 05/06/2024 घोषणा क" तारीख /Date Of Pronouncement: 12/06/2024 आदेश/O R D E R Per Dr. Manish Borad: The Present Appeal Is Directed At The Instance Of The Assessee Against The Order Of The National Faceless Appeal Centre, Delhi, (Hereinafter The “Ld. Cit(A)”) Dt. 20/12/2023, Passed U/S 250 Of The Income Tax Act, 1961 (“The Act”) For Assessment Year 2012-13. 2. The Registry Has Pointed Out That There Is A Delay Of 26 Days In Filing Of This Appeal. Affidavit Has Been Filed In Support Of The Prayer For Condonation Of Delay & The Delay Is Mainly On Account Of The Ill Health Of The Accountant Of The Assessee Concern Which Restrained Him To Look After The Regular Office Affairs & Could Not Check The Income Tax Portal From Time To Time. At A Later Stage When It Was Found That Ex-Parte Order Has Already Been Passed By The Ld. Cit(A), The Assessee Preferred Appeal Before This Tribunal. Under These Circumstances

For Appellant: Shri Siddarth Agarwal, AdvocateFor Respondent: Shri Abhijit Kundu, Addl. CIT D/R
Section 133(6)Section 142(1)Section 143(2)Section 250Section 35DSection 68