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)

Jt. CIT (OSD) Cent. Cir. 4(1) Cent. RG. 4, Mumbai vs. Bijesh Thakkar, Mumbai

In the result, the appeal filed by the revenue is hereby ordered to be dismissed

ITA 2787/MUM/2016[2011-12]Status: DisposedITAT Mumbai15 Jan 2018AY 2011-12

Bench: Shri Rajendra, Am & Shri Amarjit Singh, Jm आयकर अपील सं/ I.T.A. No.2787/Mum/2016 (निर्धारण वर्ा / Assessment Year: 2011-12) Jt. Commissioner Of Income बिधम/ Shri Bijesh Thakker Prop, Tax, (Osd), Central Circle Thakker & Thakker 601, Vs. 4(1), Central Range-4, R.No. Embassy Centre, Nariman 1916, 19Th Floor, Air India Point, Mumbai 400021 Building, Nariman Point, Mumbai-400021 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaapt7758G (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue By: Shri Saurabh Deshpande (Dr) Assessee By: Shri Sanjiv M. Shah सुनवाई की तारीख / Date Of Hearing: 26.10.2017 घोषणा की तारीख /Date Of Pronouncement: 15.01.2018 आदेश / O R D E R Per Amarjit Singh, Jm: The Revenue Has Filed The Present Appeal Against The Order Dated 01.01.2016 Passed By The Commissioner Of Income Tax (Appeals)-5 Mumbai [Hereinafter Referred To As The “Cit(A)”] Relevant To The Ay.2011-12. 2. The Revenue Has Raised The Following Grounds:- 1. On The Facts & In The Circumstances Of The Case & In Law, The Ld.Cit(A) Has Erred In Deleting The Addition Made U/S.14A R.W. Rule

For Appellant: Shri Sanjiv M. ShahFor Respondent: Shri Saurabh Deshpande (DR)
Section 142(1)Section 143(1)Section 143(2)Section 14ASection 14A(3)Section 195Section 40A

Spt Securities Pvt. Ltd., Kolkata vs. DCIT, Circle - 5, Kolkata

In the result, appeal filed by the assessee (Ground no

ITA 265/KOL/2016[2009-2010]Status: DisposedITAT Kolkata12 Jan 2018AY 2009-2010

Bench: Shri A. T Varkey, Jm &Dr. A.L.Saini, Am आयकरअपीलसं./Ita No.265/Kol/2016 (िनधा"रणवष" / Assessment Year: 2009-10) Spt Securities Pvt. Ltd. Vs. Dcit, Circle-5, Kolkata 11, Clive Row, 2Nd Floor, Kolkata – 1. Ayakar Bhavan, P-7, Chowringhee Square, Kolkata – 69. "थायीलेखासं./जीआइआरसं./Pan/Gir No. :Aadcs 8015 P (Assessee) .. (Respondent) Assessee By : Shri Subash Agarwal, Advocate. Respondent By : None सुनवाईकीतारीख/ Date Of Hearing : 17/11/2017 घोषणाकीतारीख/Date Of Pronouncement : 12/01/2018 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Assessee, Pertaining To Assessment Year 2009-10, Is Directed Against The Order Passed By The Ld. Commissioner Of Income Tax (Appeals)–2, Kolkata, In Appeal No.987/Cit(A)-2/C-5/14-15 Dated 14.12.2015, Which In Turn Arises Out Of An Order Passed By The Ao U/S.143(3) Of The Income Tax Act 1961 (Hereinafter Referred To As The ‘Act’) Dated 28.03.2011. The Assessee Has Raised The Following Grounds Of Appeal: 2. “1. That The Order Of The Ld. Commissioner Of Income Tax Is Bad In Law & On Facts Of The Case. 2.That The Ld. Commissioner Of Income Tax(Appeals) Erred In Upholding The Disallowance Of Sub-Brokerage Payments To Sub-Brokers On The Transactions Related To Shares & Securities Inspite Of Specific Exclusion Of The ‘Brokerage On Shares Trade’ From The Definition Of ‘Commission & Brokerage’ In The Explanation To Section 194H. 3.The Ld. Commissioner Of Income Tax(Appeal) Also Erred In Holding That The Appellant Could Not Prove The Transaction To Be Related To The Trading Of Shares Of Securities. 4.The Ld. Commissioner Of Income Tax(Appeals) Further Erred In Upholding The Addition U/S 14A In Respect Of Shares Held As Stock By The Appellant Company.

For Appellant: Shri Subash Agarwal, AdvocateFor Respondent: NONE
Section 143(1)Section 143(2)Section 143(3)Section 14ASection 194HSection 40