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

Income-tax Act, 2025: s.35

Section 40(a)(ia) 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)(ia) is S.A. Builders Ltd. v. CIT (288 ITR 1), cited in 1,484 of the 7,300 judgments on BharatTax that turn on this section.

Leading authorities on Section 40(a)(ia)

S.A. Builders Ltd. v. CIT
288 ITR 1 · 2007 · Supreme Court
1,484
citing judgments

Interest paid on borrowed funds cannot be disallowed merely because the assessee made interest-free advances, provided those advances were made for business purposes and commercial expediency. The Revenue cannot dictate a businessman's commercial decisions, but the assessee bears the onus to prove the business expediency.

CIT v. Alom Extrusions Ltd.
319 ITR 306 · 2009 · Supreme Court
1,344
citing judgments

A proviso inserted into a section to remedy unintended consequences, make the section workable, or supply an obvious omission must be read retrospectively in operation to give effect to the section as a whole.

CIT v. Woodward Governor India Pvt. Ltd.
312 ITR 254 · 2009 · Supreme Court
968
citing judgments

Foreign exchange fluctuations, whether gains or losses, are inextricably linked to the underlying business transaction and must be accounted for under the mercantile system. The Supreme Court also affirmed the standard accounting principle of valuing stock at cost or net realisable value, whichever is lower.

Bharat Earth Movers v. CIT
245 ITR 428 · 2000 · Supreme Court
901
citing judgments

A business liability that has definitely arisen in an accounting year is deductible even if it needs to be quantified and discharged later, as long as its incurring is certain and can be reasonably estimated.

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.

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.

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.

Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT
227 ITR 172 · 1997 · Supreme Court
621
citing judgments

Interest income earned on deposits, particularly before the commencement of business operations or as a requirement for business licensing, is taxable as "income from other sources" under Section 56, and cannot be treated as business income or set off against interest on borrowed funds.

Hindustan Coca Cola Beverage Pvt. Ltd. v. CIT
293 ITR 226 · 2007 · Supreme Court
576
citing judgments

The deductor cannot be treated as an assessee-in-default under Section 201(1) if the deductee has already paid the tax or offered the impugned receipts in their return of income. However, interest under Section 201(1A) for delayed deposit of tax can still be levied up to the date of filing of the return of income by the deductee.

CIT v. Reliance Industries Ltd.
410 ITR 466 · 2019 · Supreme Court
501
citing judgments

When mixed funds are available, interest-free advances are presumed to be made from the assessee's own interest-free funds, preventing disallowance of interest expenditure under section 36(1)(iii). This principle also applies to section 14A disallowance, where interest expenditure is not disallowed if surplus funds are available and no direct nexus is established with borrowed funds for investments earning exempt income.

Judgments on Section 40(a)(ia)

Rayat Sahakari Sakhar Karkhana Limited, Satara vs. Assistant Commissioner of Income-Tax, Satara - Circle, Satara

In the result, appeal of the assessee is partly allowed

ITA 1582/PUN/2019[2007-08]Status: DisposedITAT Pune29 Aug 2022AY 2007-08

Bench: Shri S.S.Godara & Dr. Dipak P. Ripoteआयकरअपीलसं. / Ita No.1582/Pun/2019 िनधा"रणवष" / Assessment Year : 2007-08 Rayat Sahakari Sakhar The Acit, Circle Satara. Karkhana Ltd, Vs A/P. Shewalewadi, Tal. Karad, Dist. Satara – 415011. Pan: Aabar 0241 C Appellant/ Assessee Respondent / Revenue Assessee By Shri Hanmant Dhavle - Ar Revenue By Shri Sardar Singh Meena –Cit-Dr Date Of Hearing 19/07/2022 Date Of Pronouncement 29/08/2022 आदेश/ Order Per Dr. Dipak P. Ripote, Am: This Appeal Filed By The Assessee Is Directed Against The Order Of Ld.Commissioner Of Income Tax(Appeals)-13, Pune For The Assessment Year 2007-08 Dated 11.07.2019, Emanating Out Of Order Under Section 143(3) Of The Income Tax Act, 1961[In Short “The Act”]. The Assessee Has Raised Following Grounds Of Appeal: “1. On The Fact & In The Circumstance Of The Case & In Law Of The Learned Commissioner Of Income Tax (Appeals) - 13, Pune Has Grievously Erred In Deciding The Appeal Ex-Parte, Without Providing Sufficient Opportunity To Appellate. 2. On The Fact & In The Circumstance Of The Case & In Law Of The Learned Commissioner Of Income Tax (Appeals) - 13, Pune Has Ought To Have Decided The Appeal On Merits Instead Of Dismissing The Appeal For Non Attendance. 3. On The Fact & In The Circumstance Of The Case & In Law Of The Learned Commissioner Of Income Tax (Appeals) - 13

Section 143(3)Section 40Section 43B

D.D. Builders Ltd., Ladugaon vs. ACIT, Central Circle- 2, Bhubaneswar

In the result, appeal of the assessee is partly allowed

ITA 66/CTK/2020[2014-15]Status: HeardITAT Cuttack24 Aug 2022AY 2014-15

Bench: Before S/Shri George Mathan, Judicial & Arun Khodpia & Arun Khodpia & Arun Khodpiaassessment Year : 2014-15 D.D.Builders, D.D.Builders, At/Po: At/Po: Vs. Asst. Asst. Commissioner Commissioner Of Of Ladugaon, Kalahandi. Ladugaon, Kalahandi. Income Tax, Central Circle Income Tax, Central Circle- 2, Bhubaneswar. 2, Bhubaneswar. Pan/Gir No. Pan/Gir No.Aabcd 1433 E (Appellant (Appellant) .. ( Respondent Respondent) Assessee By : S/Shri P.S.Panda/K.K.Agarwal P.S.Panda/K.K.Agarwal Revenue By : Shri S.C.Mohanty, : Shri S.C.Mohanty, Sr Dr Date Of Hearing : 24/8 8/2022 Date Of Pronouncement : 24/8 8/2022 O R D E R Per Bench This Is An Appeal Filed By The Assessee Against The Order Of The Ld This Is An Appeal Filed By The Assessee Against The Order Of The Ld This Is An Appeal Filed By The Assessee Against The Order Of The Ld Cit(A)-1, Bhubaneswar 1, Bhubaneswar Dated 28.9.2018 In Appeal No. In Appeal No.0342/16-17 For The Assessment Year Assessment Year 2014-15. 2. S/Shri P.S.Panda/K.K.Agarwal, Ld Ars Appeared On Behalf Of The S/Shri P.S.Panda/K.K.Agarwal, Ld Ars Appeared On Behalf Of The S/Shri P.S.Panda/K.K.Agarwal, Ld Ars Appeared On Behalf Of The Assessee & Shri S.C.Mohanty, Ld Sr Dr Appeared For The Revenue. Assessee & Shri S.C.Mohanty, Ld Sr Dr Appeared For The Revenue. Assessee & Shri S.C.Mohanty, Ld Sr Dr Appeared For The Revenue.

For Appellant: S/Shri P.S.Panda/K.K.AgarwalFor Respondent: Shri S.C.Mohanty
Section 37(1)Section 40

Gopinathan, Cumbum vs. Income Tax Officer, Theni

In the result, the appeal filed by the assessee is allowed

ITA 25/CHNY/2022[2012-13]Status: DisposedITAT Chennai24 Aug 2022AY 2012-13

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./I.T.A. No. 25/Chny/2022 िनधा"रण वष"/Assessment Year:2012-13 Shri Gopinathan, The Income Tax Officer, No. 37/4, L.F. Road, Opp. To Vs. Ward 1, Government Hospital, Cumbum, Theni. Theni District 625 516. [Pan:Ardpg2494G] (अपीलाथ"/Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By : Shri G. Gopalan (Irs) Ret. Jcit ""थ" की ओर से/Respondent By : Shri Ar V Sreenivasan, Addl. Cit सुनवाई की तारीख/ Date Of Hearing : 19.07.2022 घोषणा की तारीख /Date Of Pronouncement : 24.08.2022 आदेश /O R D E R Per V. Durga Rao: This Appeal Filed By The Assessee Is Directed Against The Order Of The Ld. Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), New Delhi, Dated 12.11.2021 Relevant To The Assessment Year 2012-13. Besides Challenging Confirmation Of Addition Of ₹. 4,66,455/- On Account Of Alleged Infringement Of Section 194C Of The Income Tax Act, 1961 [“Act” In Short], The Assessee Has Also Challenged The Rectification Order Passed Under Section 154 Of The Act On The Pretext

For Appellant: Shri G. Gopalan (IRS) Ret. JCITFor Respondent: Shri AR V Sreenivasan, Addl. CIT
Section 142(1)Section 143(2)Section 143(3)Section 147Section 148Section 154Section 194CSection 194C(6)Section 194C(7)Section 40