Section 36(2) of the Income Tax Act

Income-tax Act, 2025: ss.29, 30, 31, 32

Section 36(2) 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(2) is TRF Ltd. v. CIT (323 ITR 397), cited in 714 of the 618 judgments on BharatTax that turn on this section.

Leading authorities on Section 36(2)

TRF Ltd. v. CIT
323 ITR 397 · 2010 · Supreme Court
714
citing judgments

For claiming deduction for bad debts under section 36(1)(vii) of the Income Tax Act, it is sufficient for the assessee to write off the debt as irrecoverable in its accounts, and it is not necessary to prove that the debt has actually become irrecoverable.

CIT v. Asahi India Safety Glass Ltd.
346 ITR 329 · 2012 · High Court
129
citing judgments

Expenses incurred for software license purchase, development of miscellaneous software, and maintenance of websites are considered revenue in nature. Such expenses are deductible in the year they are incurred.

CIT v. Mysore Sugar Co. Ltd.
46 ITR 649 · 1962 · Supreme Court
120
citing judgments

When advances extended in the normal course of business operations become irrecoverable and are written off, these amounts are allowable as a business loss or revenue expenditure.

CIT v. Pfizer Ltd.
330 ITR 62 · 2011 · High Court
78
citing judgments

An insurance claim received on stock in trade constitutes business income and is not an independent source of income.

Lord Radcliffe in Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd.
58 ITR 241 · 1965 · Reported
69
citing judgments

The test of enduring benefit for classifying expenditure as capital or revenue is not absolute; expenditure incurred for an enduring advantage may nonetheless be on revenue account, as the test can break down depending on the facts.

Mohan Meakin Ltd. v. CIT
348 ITR 109 · 2012 · High Court
58
citing judgments

Unrecoverable trade advances, including loans to joint venture partners or advances against land, are allowable as a business loss incidental to trade under Section 37(1) of the Income Tax Act when written off in the books of accounts. Such losses are treated akin to bad debts eligible for deduction.

Ramchandar Shivnarayan v. CIT
111 ITR 263 · 1978 · Supreme Court
48
citing judgments

A business loss is deductible if it has a direct and proximate nexus with business operations or is incidental to them, applying a commercial standard, even without an explicit statutory provision for its deduction.

CIT v. Shreyas S. Morakhia
342 ITR 285 · 2012 · High Court
48
citing judgments

For a share broker, the unrealised value of shares from clients or other trade balances written off is deductible as a bad debt under section 36(1)(vii) if the corresponding income was previously recognized. This principle applies to bad debts arising from revenue transactions, not capital loans.

CIT v. Anil Kumar
392 ITR 552 · 2017 · High Court
40
citing judgments

When there is nothing on record to establish the financial capacity, creditworthiness, or relationship of a donor with the assessee, an addition to income can be justified.

Smt. Neena Syal v. ACIT
70 ITD 62 · 1999 · ITAT
39
citing judgments

Disallowance of expenses cannot be made if their genuineness is not challenged. For unexplained money, possession of gold jewellery by married ladies up to 500 grams is considered explained.

Judgments on Section 36(2)

JCIT (OSD) 9(1)(2), Mumbai vs. Aptech Ltd, Mumbai

In the result, this appeal filed by the Revenue is partly allowed for statistical purposes

ITA 3369/MUM/2016[2007-08]Status: DisposedITAT Mumbai01 Mar 2018AY 2007-08

Bench: Shri Shamim Yahya, Am & Shri Ram Lal Negi, Jm आयकर अपील सं./I.T.A. No.3369/Mum/2016 ("नधा"रण वष" / Assessment Year: 2007-08) Dy. Cit-9(1)(2), M/S. Aptech Limited बनाम/ Room No. 260A, 2Nd Floor, A-65, Aptech House, Midc, Aayakar Bhavan, M. K. Road, Andheri (E), Mumbai-400 093 Vs. Mumbai-400 020 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. Aadca 0602 L (अपीलाथ" /Appellant) (""यथ" / Respondent) : अपीलाथ" क" ओर से / Appellant By : Shri Ram Tiwari ""यथ" क" ओर से/Respondent By : Shri Rutuja Pawar सुनवाई क" तार"ख / : 04.01.2018 Date Of Hearing घोषणा क" तार"ख / : 01.03.2018 Date Of Pronouncement आदेश / O R D E R Per Shamim Yahya, A. M.: This Appeal By The Revenue Is Directed Against The Order By The Commissioner Of Income Tax (Appeals) Dated 29.04.2014 & Pertains To The Assessment Year 2007- 08. 2. The Grounds Of Appeal Read As Under: I) “Whether On The Facts & In The Circumstances Of The Case, The Ld. Cit- (A) Erred In Deleting The Penalty On The Issue Of Provision For Rebate Claimed Without Appreciating The Fact That The Same Was A Mere Provision & Was 2 Dy. Cit Vs. M/S. Aptech Limited Patently Not Allowable Which Amounts To Furnishing Inaccurate Particulars In The Return Of Income, Thus Liable For Penalty?" Ii) “'Whether On The Facts & In The Circumstances Of The Case, The Ld. Cit- (A) Erred In Deleting The Penalty On The Issue Of Provision For Leave Encashment Without Appreciating The Fact That The Same Was Not Paid Before The Due Date Of Filing Of Return Of Income As Mandated By Clause (F) Of Section 43B Of The It, Act, Thereby Making A Claim Which Is Patently Inaccurate, Hence Liable For Penalty?" '

For Appellant: Shri Ram TiwariFor Respondent: Shri Rutuja Pawar
Section 271(1)(c)Section 36(2)Section 43B

Sri Sibendu Basu, Kolkata vs. DCIT, Cir.-54, Kolkata

In the result, the appeal of the assessee is dismissed

ITA 315/KOL/2017[2006-07]Status: DisposedITAT Kolkata22 Dec 2017AY 2006-07

Bench: Hon’Ble Shri P.M. Jagtap] I.T.A. No. 315/Kol/2017 Assessment Year : 2006-07 Shri Sibendu Basu.............................………………………………………….............Appellant 39A, Townshend Road, Ground Floor, Kolkata – 700 025 [Pan : Aecpb 9682 F] D.C.I.T. Cir-54 Kolkata...................……………………………………………….......Respondent 54/1, Rafi Ahmed Kidwai Road, Kolkata – 700 016 Appearances By: Shri Subash Agarwal, Advocate Appearing On Behalf Of The Assessee. Shri Satyajit Mondal, Addl. Cit Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : October 31, 2017 Date Of Pronouncing The Order : December 22, 2017 Order This Appeal Filed By The Assessee Is Directed Against The Order Of Ld. Cit (Appeals) – 21, Kolkata Dated 03.01.2017. 2. The Issue Involved In Ground No 1 Relates To The Addition Of Rs. 5,34,700/- Made By The A.O. & Confirmed By The Ld. Cit(A) On Account Of Disallowance Of Fund Mobilisation Expenses. 3. The Assessee In The Present Case Is An Individual Who Derives Income From Legal Profession, Commission & Brokerage From Insurance & Mutual Funds Companies, Long Term & Short Term Capital Gains Etc. The Return Of Income For The Year Under Consideration Was Filed By Him 30.10.2006 Declaring A Total Income Of Rs. 2,66,160/-. In The Profit & Loss Account Filed Along With The Said

Section 131

D.C.I.T., Circle-10, Kolkata vs. M/S. Singhania & Sons Pvt. Ltd., Kolkata

In the result, the appeal filed by the Revenue, is dismissed

ITA 1896/KOL/2014[2011-2012]Status: DisposedITAT Kolkata04 Dec 2017AY 2011-2012

Bench: Shri A. T Varkey, Jm &Dr. A.L.Saini, Am आयकरअपीलसं./Ita No.1896/Kol/2014 (िनधा"रणवष" / Assessment Year: 2011-12 Dcit, Circle-10, Kolkata Vs. M/S Singhania & Sons Pvt. Ltd. 3D, Shakespeare Sarani, Duck Back House, Kolkata – 17. "थायीलेखासं./जीआइआरसं./Pan/Gir No. : Aadcs 6078 A (Appellant) .. (Respondent) Appellant By : Shri Kalyan Nath, Acit, Dr Respondent By : Shri Manoj Kataruka, Advocate सुनवाईकीतारीख/ Date Of Hearing : 05/09/2017 घोषणाकीतारीख/Date Of Pronouncement : 04/12/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Revenue, Pertaining To Assessment Year 2011-12, Is Directed Against An Order Passed By The Ld. Commissioner Of Income Tax (Appeals)-Xii, Kolkata In Appeal No.496/Xii/Cir-10/13-14, Dated 21.07.2014, Which In Turn Arises Out Of An Order Passed By The Assessing Officer U/S 143(3) Of The Income Tax Act, 1961, Dated 07.03.2014. 2.The Revenue Has Raised The Following Grounds Of Appeal: “1.That Is The Facts & In Law Of The Case The Ld. Cit(A) Erred In Deleting The Deduction Of Rs.96,78,546/- Under The Service Tax Claim

For Appellant: Shri Kalyan Nath, ACIT, DRFor Respondent: Shri Manoj Kataruka, Advocate
Section 143(2)Section 143(3)Section 36(2)