Section 35DD of the Income Tax Act
Income-tax Act, 2025: s.52
Section 35DD of the Income-tax Act, 1961 corresponds to section 52 (Amortisation of expenditure for telecommunications services, amalgamation, demerger, scheme of voluntary retirement, etc) of the Income-tax Act, 2025.
Read section 52 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 35DD is DP World (P.) Ltd. v. DCIT (140 ITD 694), cited in 17 of the 115 judgments on BharatTax that turn on this section.
Leading authorities on Section 35DD
A transaction of gift cannot be brought to tax. Corporations can give and accept gifts, and these are considered capital receipts, not taxable under Section 28(iv).
Section 41(1) of the Income-tax Act cannot be invoked if no deduction was granted in earlier years, as it pertains to the remission of trading liabilities and waiver of loans. Waiver of a loan is considered a cessation of liability other than a trading one.
Reserves created under a scheme of amalgamation are capital in nature and do not arise from normal business activity, therefore cannot be taxed as business income. Amounts reflected in 'reserves and surplus' cannot be treated as a benefit or perquisite arising from business.
A transaction between two enterprises constitutes an 'international transaction' under section 92B only if it has a bearing on profits, incomes, losses, or assets of such enterprises. This includes transactions mentioned in the explanation to section 92B, such as giving guarantees, provided they impact the enterprise's financial results.
