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)

Orissa Cooperative Marketing Federation Limited, Bhubaneswar vs. JCIT, Range-II, Bhubaneswar

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

ITA 70/CTK/2018[2014-15]Status: DisposedITAT Cuttack26 Oct 2021AY 2014-15

Bench: S/ S/Shri Chandra Mohan Garg, Judicial & Manish Borad & Manish Borad & Manish Boradassessment Year : 2014-15 Orissa Orissa Co Co-Op Marketing Vs. Jcit, Range Jcit, Range-Ii, Bhubaneswar. Federation Federation Ltd., Ltd., Old Old Station Station Road, Bhubaneswar. Road, Bhubaneswar. Pan/Gir No. No.Aaaao 0258 K (Appellant (Appellant) .. ( Respondent Respondent) Assessee By : Shri P.R.Mohanty P.R.Mohanty , Ar Revenue By : Shri M.K.Gautam, Cit (Dr) Date Of Hearing : 25 /10/ 20 / 2021 Date Of Pronouncement : 26/10 10/2021 O R D E R Per Bench This Is An Appeal Filed By The Assessee Against The Order Of The This Is An Appeal Filed By The Assessee Against The Order Of The This Is An Appeal Filed By The Assessee Against The Order Of The Cit(A),1, Bhubaneswar Cit(A),1, Bhubaneswar Dated 30.11.2017 For The Assessment Year For The Assessment Year 2014- 15. 2. In The Grounds Of Appeal, The Assessee Is Aggrieved By The Decision In The Grounds Of Appeal, The Assessee Is Aggrieved By The Decision In The Grounds Of Appeal, The Assessee Is Aggrieved By The Decision Of The Ld Cit(A) In Confirming The Assessment U/S.144 Of The Act, Adhoc Of The Ld Cit(A) In Confirming The Assessment U/S.144 Of The Act, Adhoc Of The Ld Cit(A) In Confirming The Assessment U/S.144 Of The Act, Adhoc Disallowance Of 10% Of Advertisement Expenses, Donation Expenses Of Disallowance Of 10% Of Advertisement Expenses, Donation Expenses Of Disallowance Of 10% Of Advertisement Expenses, Donation Expenses Of Rs.3,60,107/- & Addition Of Rs.5,05,76,375/-.

For Appellant: Shri P.R.MohantyFor Respondent: Shri M.K.Gautam
Section 144Section 40

Blooming Diagnostics & Impex Pvt. Ltd., New Delhi vs. ITO, Ward- 5(1), New Delhi

In the result, the appeal filed by the assessee is allowed for statistical purposes

ITA 4531/DEL/2017[2012-13]Status: DisposedITAT Delhi26 Oct 2021AY 2012-13

Bench: Shri R.K. Panda & Shri Kuldip Singhassessment Year: 2012-13 Blooming Diagnostics & Impex Vs Ito, Pvt. Ltd., Ward-5(1), C/O R.K. Tuli & Associates, Ca, New Delhi. 11/37, Old Rajinder Nagar, New Delhi. Pan : Aaccb9882G (Appellant) (Respondent) Assessee By : Shri Baldev Raj, Ca Revenue By : Shri Om Prakash, Sr. Dr Date Of Hearing : 26.10.2021 Date Of Pronouncement : 26.10.2021 Order Per R.K. Panda, Am: This Appeal Filed By The Assessee Is Directed Against The Ex Parte Order Dated 10Th March, 2017 Of The Cit(A)-2, New Delhi, Relating To The Assessment Year 2012-13. 2. Although A Number Of Grounds Have Been Raised By The Assessee, These All Relate To The Ex Parte Order Of The Cit(A) In Confirming The Various Additions Made By The Ao & Determining The Total Income Of The Assessee At Rs.2,24,13,520/- Against The Returned Income Of The Assessee Of Rs.5,95,800/-. 3. Facts Of The Case, In Brief, Are That The Assessee Is A Private Limited Company Engaged In The Business Of Trading Of Drugs, Medicines & Pathological Items. It Filed Its Return Of Income On 6Th July, 2013 Declaring The Total Income Of Rs.5,95,810/-. The Case Was Selected For Scrutiny Under Cass & Notice U/S 143(2) Of The Act Dated 02.09.2014 Was Issued & Served Upon The Assessee Through Speed Post. A Questionnaire Dated 22Nd October, 2014 U/S 142(1) Of The Act Was Issued & Served Upon The Assessee For Compliance.

For Appellant: Shri Baldev Raj, CAFor Respondent: Shri Om Prakash, Sr. DR
Section 131Section 142(1)Section 143(2)Section 40Section 68