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. Surendranagar District Co-Op. Milk Producers Union Ltd., Surendranagar vs. The DCIT, Surendranagr Circle, Surendranagar

Appeal of the assessee is dismissed

ITA 262/RJT/2018[2012-13]Status: DisposedITAT Rajkot20 Sept 2019AY 2012-13

Bench: Shri Rajpal Yadav & Shri Waseem Ahmedआयकर अपील सं./I.T.A. No.262-263/Rjt/2018 ("नधा"रण वष" / Assessment Years: 2012-13 & 2013-14) बनाम/ M/S.Surendranagar District D.C.I.T, Co-Op. Milk Producers Surendranagar Circle, Vs. Union Ltd. Surendranagar. Wadhwan City, Surendranagar "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaaas8375B (अपीलाथ" /Appellant) .. (""यथ" / Respondent) अपीलाथ" ओर से / Appellant By : Shri Kalpesh Doshi, A.R ""यथ" क" ओर से/Respondent By : Shri Jitender Kumar, Dr सुनवाई क" तार"ख / Date Of Hearing 17/09/2019 घोषणा क" तार"ख /Date Of Pronouncement 20/09/2019 आदेश / O R D E R Per Waseem Ahmed: The Captioned Appeals Have Been Filed At The Instance Of The Assessee Against The Separate Orders Of The Learned Commissioner Of Income Tax (Appeals)-7, Ahmedabad [Ld. Cit(A) In Short] Of Even Dated 12/01/2018, Arising In The Matter Of Assessment Order Passed Under 143(3) Of The Income Tax Act, 1961 (Hereinafter Referred To As "The Act") Dated 26/03/2015 Relevant To Assessment Years (A.Ys) 20012-13 & 2013-14. Ita Nos.262-263/Rjt/2018 A.Y.S 2012-13 To 2013-14 First, We Take Up Ita No. 262/Rjt/2018 For A.Y. 2013-14

For Appellant: Shri Kalpesh Doshi, A.RFor Respondent: Shri Jitender Kumar, DR
Section 194JSection 36Section 40Section 40A(3)Section 43BSection 48Section 80P(2)(b)Section 80P(2)(d)

The ITO, Ward-2(2), Jamnagar vs. Smt. Shitalben Saurabh Vora, Jamnagar

Appeal of the assessee is dismissed

ITA 651/RJT/2014[2003-04]Status: DisposedITAT Rajkot20 Sept 2019AY 2003-04

Bench: Shri Rajpal Yadav & Shri Waseem Ahmedआयकर अपील सं./I.T.A. No.262-263/Rjt/2018 ("नधा"रण वष" / Assessment Years: 2012-13 & 2013-14) बनाम/ M/S.Surendranagar District D.C.I.T, Co-Op. Milk Producers Surendranagar Circle, Vs. Union Ltd. Surendranagar. Wadhwan City, Surendranagar "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaaas8375B (अपीलाथ" /Appellant) .. (""यथ" / Respondent) अपीलाथ" ओर से / Appellant By : Shri Kalpesh Doshi, A.R ""यथ" क" ओर से/Respondent By : Shri Jitender Kumar, Dr सुनवाई क" तार"ख / Date Of Hearing 17/09/2019 घोषणा क" तार"ख /Date Of Pronouncement 20/09/2019 आदेश / O R D E R Per Waseem Ahmed: The Captioned Appeals Have Been Filed At The Instance Of The Assessee Against The Separate Orders Of The Learned Commissioner Of Income Tax (Appeals)-7, Ahmedabad [Ld. Cit(A) In Short] Of Even Dated 12/01/2018, Arising In The Matter Of Assessment Order Passed Under 143(3) Of The Income Tax Act, 1961 (Hereinafter Referred To As "The Act") Dated 26/03/2015 Relevant To Assessment Years (A.Ys) 20012-13 & 2013-14. Ita Nos.262-263/Rjt/2018 A.Y.S 2012-13 To 2013-14 First, We Take Up Ita No. 262/Rjt/2018 For A.Y. 2013-14

For Appellant: Shri Kalpesh Doshi, A.RFor Respondent: Shri Jitender Kumar, DR
Section 194JSection 36Section 40Section 40A(3)Section 43BSection 48Section 80P(2)(b)Section 80P(2)(d)

Jayshri Silk Processing Mills P. Ltd., Jetpur vs. The Asstt. Commr. of Income Tax, Cen. Cir.-1, Rajkot-Gujarat

In the result, the appeal of the assessee is allowed

ITA 172/RJT/2017[2009-10]Status: DisposedITAT Rajkot18 Sept 2019AY 2009-10

Bench: Shri Rajpal Yadav & Shri Waseem Ahmedआयकर अपील सं./I.T.A. Nos.170-172/Rjt/2017 ("नधा"रण वष" / Assessment Years : 2006-07, 2008-09 & 2009-10) बनाम/ Jayshri Silk Processing Mills A.C.I.T, Pvt. Ltd., Central Circle-1, Vs. Pedhla, Rajkot. Jetpur "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aabfj5033F (अपीलाथ" /Appellant) (""यथ" / Respondent) .. अपीलाथ" ओर से / Appellant By : None ""यथ" क" ओर से/Respondent By : Shri Jitender Kumar, Dr. सुनवाई क" तार"ख / Date Of Hearing 17/09/2019 घोषणा क" तार"ख /Date Of Pronouncement 18/09/2019 आदेश / O R D E R Per Waseem Ahmed: The Captioned Appeals Have Been Filed At The Instance Of The Assessee Against The Separate Orders Of Learned Commissioner Of Income Tax (Appeals)-11, Ahmedabad [Ld. Cit(A) In Short] Of Even Dated 17/03/2017, Arising In The Matter Of Assessment Order Passed Under S.153A R.W.S. 143(3) Of The Income Tax Act, 1961 (Hereinafter Referred To As "The Act") Relevant To Assessment Years (A.Ys) 2006-07, 2008-09 & 2009-10. Ita Nos.170-172/Rjt/2017 A.Y.S 2006-07, 2008-09 & 2009-10 At The Outset, We Note That The Assessee Has Filed The Adjournment Application But We Rejected The Same As The Issue Was Covered. Hence, We Proceed To Hear The Appeal Ex-Party Qua The Assessee.

For Appellant: NoneFor Respondent: Shri Jitender Kumar, DR
Section 40Section 46A

Jayshri Silk Processing Mills P. Ltd., Jetpur vs. The Asstt. Commr. of Income Tax, Cen. Cir.-1, Rajkot-Gujarat

In the result, the appeal of the assessee is allowed

ITA 171/RJT/2017[2008-09]Status: DisposedITAT Rajkot18 Sept 2019AY 2008-09

Bench: Shri Rajpal Yadav & Shri Waseem Ahmedआयकर अपील सं./I.T.A. Nos.170-172/Rjt/2017 ("नधा"रण वष" / Assessment Years : 2006-07, 2008-09 & 2009-10) बनाम/ Jayshri Silk Processing Mills A.C.I.T, Pvt. Ltd., Central Circle-1, Vs. Pedhla, Rajkot. Jetpur "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aabfj5033F (अपीलाथ" /Appellant) (""यथ" / Respondent) .. अपीलाथ" ओर से / Appellant By : None ""यथ" क" ओर से/Respondent By : Shri Jitender Kumar, Dr. सुनवाई क" तार"ख / Date Of Hearing 17/09/2019 घोषणा क" तार"ख /Date Of Pronouncement 18/09/2019 आदेश / O R D E R Per Waseem Ahmed: The Captioned Appeals Have Been Filed At The Instance Of The Assessee Against The Separate Orders Of Learned Commissioner Of Income Tax (Appeals)-11, Ahmedabad [Ld. Cit(A) In Short] Of Even Dated 17/03/2017, Arising In The Matter Of Assessment Order Passed Under S.153A R.W.S. 143(3) Of The Income Tax Act, 1961 (Hereinafter Referred To As "The Act") Relevant To Assessment Years (A.Ys) 2006-07, 2008-09 & 2009-10. Ita Nos.170-172/Rjt/2017 A.Y.S 2006-07, 2008-09 & 2009-10 At The Outset, We Note That The Assessee Has Filed The Adjournment Application But We Rejected The Same As The Issue Was Covered. Hence, We Proceed To Hear The Appeal Ex-Party Qua The Assessee.

For Appellant: NoneFor Respondent: Shri Jitender Kumar, DR
Section 40Section 46A

Jayshri Silk Processing Mills P. Ltd., Jetpur vs. The Asstt. Commr. of Income Tax, Cen. Cir.-1, Rajkot-Gujarat

In the result, the appeal of the assessee is allowed

ITA 170/RJT/2017[2006-07]Status: DisposedITAT Rajkot18 Sept 2019AY 2006-07

Bench: Shri Rajpal Yadav & Shri Waseem Ahmedआयकर अपील सं./I.T.A. Nos.170-172/Rjt/2017 ("नधा"रण वष" / Assessment Years : 2006-07, 2008-09 & 2009-10) बनाम/ Jayshri Silk Processing Mills A.C.I.T, Pvt. Ltd., Central Circle-1, Vs. Pedhla, Rajkot. Jetpur "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aabfj5033F (अपीलाथ" /Appellant) (""यथ" / Respondent) .. अपीलाथ" ओर से / Appellant By : None ""यथ" क" ओर से/Respondent By : Shri Jitender Kumar, Dr. सुनवाई क" तार"ख / Date Of Hearing 17/09/2019 घोषणा क" तार"ख /Date Of Pronouncement 18/09/2019 आदेश / O R D E R Per Waseem Ahmed: The Captioned Appeals Have Been Filed At The Instance Of The Assessee Against The Separate Orders Of Learned Commissioner Of Income Tax (Appeals)-11, Ahmedabad [Ld. Cit(A) In Short] Of Even Dated 17/03/2017, Arising In The Matter Of Assessment Order Passed Under S.153A R.W.S. 143(3) Of The Income Tax Act, 1961 (Hereinafter Referred To As "The Act") Relevant To Assessment Years (A.Ys) 2006-07, 2008-09 & 2009-10. Ita Nos.170-172/Rjt/2017 A.Y.S 2006-07, 2008-09 & 2009-10 At The Outset, We Note That The Assessee Has Filed The Adjournment Application But We Rejected The Same As The Issue Was Covered. Hence, We Proceed To Hear The Appeal Ex-Party Qua The Assessee.

For Appellant: NoneFor Respondent: Shri Jitender Kumar, DR
Section 40Section 46A