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)

ACIT, Cir-2, Ltu - 2, Kolkata vs. M/S. Uco Bank, Kolkata

In the result, the appeal of the revenue as well as cross- objection of the assessee both are dismissed

ITA 728/KOL/2019[2012-13]Status: DisposedITAT Kolkata17 Jan 2020AY 2012-13

Bench: Shri P.M. Jagtap, Vice-(Kz) & Shri S.S. Godara, Jm] Assessment Year: 2012-13 A.C.I.T, Circle – 2, Ltu, Kolkata.....................................................................................Appellant 110, Shantipally, E.M. Bypass, Kolkata – 700 107. M/S. Uco Bank……………………………………………………..................................................Respondent 10, Btm Sarani, Kolkata – 700 001. [Pan : Aaacu 3561 B] C.O. No. 19/Kol/2019 (Arising Out Of Ita No. 728/Kol/2019) Assessment Year: 2012-13 M/S. Uco Bank……………………………………………………............................................Cross-Objector 10, Btm Sarani, Kolkata – 700 001. [Pan : Aaacu 3561 B] A.C.I.T, Circle – 2, Ltu, Kolkata.................................................................................Respondent 110, Shantipally, E.M. Bypass, Kolkata – 700 107. Appearances By: Smt. Ranu Biswas, Addl. Cit Appearing On Behalf Of The Revenue Shri D.S. Damle, Fca Appearing On Behalf Of The Assessee Date Of Concluding The Hearing : December 10, 20219 Date Of Pronouncing The Order : January 17Th , 2020 Order Per P.M. Jagtap, Vice-(Kz) This Appeal Is Preferred By The Revenue Against The Order Of Ld. Cit (A) – 23, Kolkata Dated 29.01.2019 & The Same Is Being Disposed Of Along With The Cross-Objection Filed By The Assessee Being C.O. No. 19/Kol/2019. 2. In The Present Appeal Filed By The Revenue, The Following Grounds Are Raised:

Section 10(15)Section 201Section 40

Jambeswar Jena, Angul vs. DCIT, Circle-4(1), Bhubaneswar

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

ITA 290/CTK/2019[2016-17]Status: DisposedITAT Cuttack15 Jan 2020AY 2016-17

Bench: Shri Before Shri Chandra Mohan Gargmember & Laxmi Prasad Sahuprasad Sahuassessment Year : 2016-2017 2017 Jambeswar Jambeswar Jena, Jena, (Legal (Legal Heir) Heir) Vs. Dcit, Circle 4(1), Bhubaneswar. Dcit, Circle 4(1), Bhubaneswar. Manoranjan Jena, Kulad, Nalco Manoranjan Jena, Kulad, Nalco Nagar, Angul. Pan/Gir No. No.Aewpj 6889 C (Appellant (Appellant) .. ( Respondent Respondent) Assessee By : Shri D.K.Sheth, Ar , Ar Revenue By : Shri J.K.Lenka, Dr , Dr Date Of Hearing : 03 /01/ 20 / 2020 Date Of Pronouncement : 15/01 01/2020 O R D E R Per C.M.Garg,Jm C.M.Garg,Jm This Is An Appeal Filed By The Assessee Against The Order Of The Cit(A) This Is An Appeal Filed By The Assessee Against The Order Of The Cit(A) This Is An Appeal Filed By The Assessee Against The Order Of The Cit(A)-2, Bhubaneswar For The Assessment Year Bhubaneswar For The Assessment Year 2016-17. 2. In The Grounds Of Appeal, The Grievance Of The Assessee Is That The Ld In The Grounds Of Appeal, The Grievance Of The Assessee Is That The Ld In The Grounds Of Appeal, The Grievance Of The Assessee Is That The Ld Cit(A) Is Not Justified In Confirming The Addition Of Rs.18,71,280/ Cit(A) Is Not Justified In Confirming The Addition Of Rs.18,71,280/ Cit(A) Is Not Justified In Confirming The Addition Of Rs.18,71,280/- Made Under Section 40(A)(Ia) Of The Act. Section 40(A)(Ia) Of The Act.

For Appellant: Shri D.K.Sheth, ARFor Respondent: Shri J.K.Lenka, DR
Section 40