Section 36(1)(viii) of the Income Tax Act
Income-tax Act, 2025: ss.29, 30, 31, 32
Section 36(1)(viii) falls under section 36 of the Income-tax Act, 1961, which corresponds to section 29 (Deductions related to employee welfare), section 30 (Deduction on certain premium), section 31 (Deduction for bad debt and provision for bad and doubtful debt) and section 32 (Other deductions) of the Income-tax Act, 2025.
Read section 29 of the 2025 ActRead section 30 of the 2025 ActRead section 31 of the 2025 ActRead section 32 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 36(1)(viii) is Maxopp Investment Ltd. v. CIT (347 ITR 272), cited in 516 of the 364 judgments on BharatTax that turn on this section.
Leading authorities on Section 36(1)(viii)
Disallowance under Section 14A cannot exceed the exempt income earned. The Assessing Officer must record satisfaction regarding the assessee's accounts before making any disallowance.
For a bad debt deduction under Section 36(1)(vii), the debt must be actually written off as irrecoverable in the assessee's accounts, distinct from merely making a provision for bad and doubtful debts. The assessee bears the onus to satisfy the conditions under both Section 36(1)(vii) and Section 36(2) of the Income-tax Act.
Liabilities accrued on a notional basis are allowable as deductions under the mercantile system of accounting even if their exact quantification or discharge is deferred to a future date or if the demand itself is disputed.
Rule 8D of the Income Tax Rules, read with Section 14A, applies prospectively. It cannot be applied to any assessment year prior to Assessment Year 2008-09.
The Supreme Court holds that interest paid under Section 201(1A) of the Income-tax Act, for failure to deduct tax at source, is not an allowable business expenditure under Section 37(1) of the Act.
Circulars and instructions issued by the Central Board of Direct Taxes (CBDT) under Section 119 of the Income Tax Act have the force of law and are binding on all income tax authorities. These circulars can mitigate the rigour of statutory provisions, provide administrative relief, and ensure uniform application of the Act for the benefit of the assessee.
The object clause in a partnership deed is not determinative of the head under which rental income is to be assessed; income from letting out shops and stalls developed by the assessee may still be classified as 'Income from House Property' rather than 'Profits and Gains of Business'.
Expenditure incurred by an assessee in relation to income not forming part of the total income is not deductible under Section 14A(1). The disallowance must be restricted to direct and indirect expenses having an approximate connection with the earning of such exempt income, and Rule 8D applies from Assessment Year 2008-09.
The onus is on the revenue to establish the nexus between expenses incurred and exempt income before making a disallowance under section 14A.
The 20% tax rate under Section 112 applies to capital gains arising from the transfer of a depreciable asset, even if it is deemed a short-term capital gain under Section 50, provided the asset was held for more than 36 months. The fiction created by Section 50 for treating such gains as short-term does not alter the long-term nature of the asset for applying the tax rate under Section 112.