Section 40(a)(i) of the Income Tax Act

Income-tax Act, 2025: s.35

Section 40(a)(i) falls under section 40 of the Income-tax Act, 1961, which corresponds to section 35 (Amounts not deductible in certain circumstances) of the Income-tax Act, 2025.

Read section 35 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 40(a)(i) is Rotork Controls India Pvt. Ltd. v. CIT (314 ITR 62), cited in 739 of the 2,009 judgments on BharatTax that turn on this section.

Leading authorities on Section 40(a)(i)

Rotork Controls India Pvt. Ltd. v. CIT
314 ITR 62 · 2009 · Supreme Court
739
citing judgments

A provision for expenses, such as warranty, is a deductible liability for income tax purposes if it constitutes a present obligation arising from past events, and a reliable estimate of the amount of obligation is possible.

GE India Technology Centre Pvt. Ltd. v. CIT
327 ITR 456 · 2010 · Supreme Court
663
citing judgments

Tax must be deducted at source from payments made to a non-resident under Section 195 only if such payment is chargeable to tax in India. The Assessing Officer bears the onus to establish that the payments made are indeed chargeable to tax under the Income Tax Act.

CIT v. Samsung Electronics Ltd.
345 ITR 494 · 2012 · High Court
461
citing judgments

Payments by Indian residents to non-resident foreign software suppliers for software are considered royalty, constituting income deemed to accrue in India under section 9(1)(v), thereby requiring tax deduction at source under section 195.

Ishikawajima Harima Heavy Industries Ltd. v. DIT
288 ITR 408 · 2007 · Supreme Court
394
citing judgments

Income from offshore supply of goods and services is not taxable in India if the entire transaction, including transfer of ownership and payments, occurs outside India.

Sassoon J. David & Co. Pvt. Ltd. v. CIT
118 ITR 261 · 1979 · Supreme Court
323
citing judgments

An expense incurred by an assessee for its own business, such as advertising, marketing, and promotional (AMP) expenses, cannot be disallowed merely because it incidentally or indirectly benefits the assessee's sister concerns or associated enterprises.

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.

CIT v. Toshoku Ltd.
125 ITR 525 · 1980 · Supreme Court
270
citing judgments

A non-resident commission agent is not chargeable to tax in India on commission income if no business operations are carried out in India. Consequently, no TDS is required under Section 195 on such payments.

Skycell Communications Ltd. v. DCIT
251 ITR 53 · 2001 · High Court
253
citing judgments

Technical services involve human intervention and expertise, not just routine or machine-based operations. Routine customer support and standard facility provision through technology do not constitute technical services under the Act.

Transmission Corporation of Andhra Pradesh v. CIT
239 ITR 587 · 1999 · Supreme Court
243
citing judgments

The Supreme Court lays down principles for deducting tax at source (TDS) under Section 195 on payments to non-residents, including aspects of income deemed taxable in India and the application of Double Taxation Avoidance Agreements (DTAAs) under Section 90.

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.

Judgments on Section 40(a)(i)

M/S.Sonarome Pvt. Ltd., Bangalore vs. Deputy Commissioner of Income Tax, Bangalore

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

ITA 1627/BANG/2016[2012-13]Status: DisposedITAT Bangalore19 Jun 2020AY 2012-13

Bench: Shri A. K. Garodia & Smt. Beena Pillaiassessment Year : 2012-13 M/S. Sonarome Pvt. Ltd., The Deputy Commissioner Of No.34, 35&36, Kiadb Income Tax, Industrial Area, Vs. Circle – 6(1)(2), Doddaballapur, Bengaluru. Bengaluru – 561 203. Pan : Aadcs 9267 P Appellant Respondent Assessee By : Shri. K. Seshadri, Ca Revenue By : Shri. Manjeet Singh, Addl. Cit (Dr)(Itat), Bengaluru Date Of Hearing : 11.06.2020 Date Of Pronouncement : 19.06.2020 O R D E R Per A.K. Garodiathis Appeal Is Filed By The Assessee & The Same Is Directed Against The Order Of Learned Cit(A)-6, Bengaluru, Dated 13.06.2016 For The Assessment Year 2012-13. Initially, The Assessee Raised As Many As 11 Grounds Of Appeal But Subsequently, The Assessee Filed Concise Grounds Of Appeal Containing 3 Grounds. These Grounds As Per The Concise Grounds Of Appeal Are As Under: 1. The Learned Commissioner Of Income Tax (Appeals) ("Cit(A)") Erred In Upholding The Disallowance Of Commission Expenditure Under Section 40(A)(I) Of The Act To The Tune Of 9.69.257 As No Tax Was Deductible At Source Thereon To The Extent Of 9.30.746.52 Because The Said Sums Were Not Chargeable To Tax In India. While Tax Was In Fact Deducted On A Sum Amounting To X38.511. 2. The Learned Cit(A) Erred In Upholding The Addition Of X1.75.069 On Account Of Bonus & Ex-Gratia Without Appreciating That No Deductions Were Claimed For These Sums Page 2 Of 7

For Appellant: Shri. K. Seshadri, CAFor Respondent: Shri. Manjeet Singh, Addl. CIT (DR)(ITAT), Bengaluru
Section 37Section 40