Section 36 of the Income Tax Act
Income-tax Act, 2025: ss.29, 30, 31, 32
Section 36 of the Income-tax Act, 1961 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 is (CIT v. C. Parakh & Co. (India) Ltd. (29 ITR 661), cited in 73 of the 261 judgments on BharatTax that turn on this section.
Leading authorities on Section 36
An assessee is not estopped from claiming a legally permissible deduction merely due to their prior accounting treatment or initial stance taken in the return. The correct legal position regarding an assessee's entitlement to a deduction always prevails, as there can be no estoppel against a statute or settled law.
For an expenditure to be deductible under Section 37(1), its object or motive must be solely for promoting the business. Donations made for the smooth functioning or commercial expediency of the business can also be allowable.
Employees' contributions to provident fund and ESI must be deposited by the due date prescribed under the respective welfare legislations (e.g., within 15 days of the month-end salary payment) for a deduction under section 36(1)(va) of the Income-tax Act. Failure to do so results in disallowance, even if the deposit is made before the due date for filing the income tax return under section 139(1).
Expenditure incurred wholly and exclusively for the purpose of business is deductible, even if it is unremunerative or does not yield an immediate profit. The absence of a corresponding receipt does not negate the deductibility of such an expense.
Expenditure incurred on improvements like flooring, partition, wiring, and false ceiling in existing premises is treated as revenue expenditure, not capital expenditure, even if it provides some lasting benefit. Such expenses are deductible if made for efficiently carrying on the business.
Expenditure on repairs is revenue in nature if it preserves or maintains an existing asset, rather than creating a new asset or advantage. The duration of the benefit from repairs does not determine if the expenditure is capital.
Expenditure incurred on acquiring land on lease is distinct from the expenditure incurred on outright acquisition of land, and depreciation may be allowable on leasehold rights on land.
An assessee is not estopped from claiming that a single assessment should have been made under Section 26(1) even if they previously filed separate returns for parts of a single accounting period, as there cannot be an estoppel against a statute.
