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)

M/S. Ratan Conductors, Jaipur vs. ACIT, Circle-4, Jaipur

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

ITA 1259/JPR/2019[2012-13]Status: DisposedITAT Jaipur02 Sept 2021AY 2012-13

Bench: Shri Sandeep Gosain, Jm & Shri Vikram Singh Yadav, Am Vk;Dj Vihy La-@Ita No. 1259/Jp/2019 Assessment Year: 2012-13 M/S Ratan Conductors, Cuke A.C.I.T., Vs. H-377(B), Road No. 17, Vki Area, Circle-4, Jaipur. Jaipur. Pan No.: Aabfr 8166 P Vihykfkhz@Appellant Izr;Fkhz@Respondent Fu/Kzkfjrh Dh Vksj Ls@ Assessee By : Shri Ashok Kr. Gupta (Adv) Jktlo Dh Vksj Ls@ Revenue By : Smt. Monisha Choudhary (Jcit) Lquokbz Dh Rkjh[K@ Date Of Hearing : 05/08/2021 Mn?Kks"K.Kk Dh Rkjh[K@ Date Of Pronouncement : 02/09/2021 Vkns'K@ Order Per: Sandeep Gosain, J.M. The Present Appeal Has Been Filed By The Assessee Against The Order Of The Ld. Cit(A)-2, Jaipur Dated 21/08/2019 For The A.Y. 2012-13 Wherein Following Grounds Have Been Taken By The Assessee: “1. Disallowance Of Interest Of Rs. 17,73,769/- On Account Of Non Tds:- That On The Facts & In The Circumstances Of The Case Ld. Cit(A) Has Grossly Erred In Law & Facts In Confirming Disallowance Of Interest Of Rs.17,73,769/- Paid To M/S Barelays Investment & Loan (India) Ltd. (Rs. 298826/-) & M/S Future Capital (Rs. 1474943/-) On Account Of Non Deduction Of Tds Thereon By Invoking Provisions Of Section 40(A)(Ia) Of The It Act 1961. (A) The Assessee Firm Paid, Interest Of Rs. 2,98,826/- To Nbfc. M/S Barelays Investment & Loan (India) Ltd. & Rs.14,74,943/- To M/S Future Capital Another Nbfc. The Assessee Firm Raised Loan

For Appellant: Shri Ashok Kr. Gupta (Adv)For Respondent: Smt. Monisha Choudhary (JCIT)
Section 143(3)Section 234ASection 40

M/S Shindengen India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-6(1)(1), Bangalore

In the result, the appeal is treated as allowed for statistical purpose

ITA 3343/BANG/2018[2014-15]Status: DisposedITAT Bangalore31 Aug 2021AY 2014-15

Bench: Shri N.V. Vasudevan & Shri Chandra Poojariit(Tp)A No.3343/Bang/2018 Assessment Year : 2014-15 M/S. Shindengen India Pvt. Ltd., Vs. The Deputy Commissioner Of Income Tax, Plot No.283/2, Bommasandra Jigani Link Circle -6(1)(1), Road, Bengaluru – 560 105. Bengaluru. Pan : Aarcs 8947 E Appellant Respondent Appellant By : Shri. S. D. Kapila, Advocate Respondent By : Shri. Pradeep Kumar, Cit(Dr)(Itat), Bengaluru Date Of Hearing : 30.08.2021 Date Of Pronouncement : 31.08.2021 O R D E R Per Chandra Poojarithis Is An Appeal By The Assessee Against The Order Dated 16.10.2018 Passed By The Dcit, Circle 6-(1)(1), Bengaluru, U/S.143(3) Read With Sec.144C (13) Of The Income Tax Act, 1961 (Act), In Relation To Ay 2014-15. 2. The First Issue That Arises For Consideration In This Appeal Is With Regard To The Addition Made To The Total Income Of The Assessee Of A Sum Of Rs.21,61,37,271 Being An Addition Made Consequent To Determination Of Arm’S Length Price (Alp) U/S.92 Of The Act, In Respect Of An International Transaction Entered Into By The Assessee With Its Associated Enterprise (Ae). The Assessee Is A Wholly Owned Subsidiary Of Shindengen Electric Mfg Co., Ltd, Japan. It Was Incorporated In India On August 21, 2012 Under The Indian

For Appellant: Shri. S. D. Kapila, AdvocateFor Respondent: Shri. Pradeep Kumar, CIT(DR)(ITAT), Bengaluru
Section 143(3)Section 144CSection 92Section 92C