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)

Bmc Electroplast Private Limited, Kolkata vs. A.C.I.T., Circle - 2(1), Kolkata

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

ITA 1871/KOL/2025[2017-2018]Status: DisposedITAT Kolkata10 Dec 2025AY 2017-2018

Bench: Shri Rajesh Kumar & Shri Pradip Kumar Choubeyassessment Year: 2017-18 Bmc Electroplast Pvt. Ltd…..……..………………….……….……….……Appellant 130/22, Bakrahat Road, B S Industrial Estate, Hanspukur, South 24 Parganas, Kol – 700104. [Pan: Aabcb0407E] Vs. Acit, Circle-2(1), Kolkata…………...…………………….....……...…..…..Respondent Appearances By: Rip Das, Ca, Appeared On Behalf Of The Appellant. Ruchika Sharma, Sr. Dr, Appeared On Behalf Of The Respondent. Date Of Concluding The Hearing : December 04, 2025 Date Of Pronouncing The Order : December 10, 2025 Order Per Pradip Kumar Choubey: This Appeal Filed By The Assessee Is Directed Against The Order Dated 31.12.2024 Of The Cit(Appeal), Addl/Jcit(A), Agra (Hereinafter Referred To As The “Cit(A)”) Passed U/S 250 Of The Income-Tax Act, 1961 (Hereinafter Referred To As “The Act”) For The Assessment Year 2017–18. 2. Brief Facts Of The Case Are That In This Case, The Assessee Filed Its Return Of Income For A.Y 2017-18 On 04/11/2017 Declaring A Total Loss Of Rs. 1,60,82,362/-. The Case Was Selected For Scrutiny Through Computer Assisted Scrutiny Selection (Cass). The Assessing Officer Completed The Assessment Under Section 143(3) Of The Act Determining The Total Loss At Rs. 65,20,241/- After Making Certain Disallowances As Follows: Bmc Electroplast Pvt. Ltd A) Disallowance Of Excess Claim Of Deduction U/S 35(2Ab) Amounting To Rs. 56,73,734/-

Section 143(3)Section 250Section 35Section 36(1)(va)Section 40

Arvind Lifestyle Brands Limited Formerly Known As Arvind Retail Ltd., Ahmedabad vs. The PCIT, Ahmedabad-1, Ahmedabad

In the result, the appeal of the assessee stands allowed

ITA 912/AHD/2024[2018-19]Status: DisposedITAT Ahmedabad09 Dec 2025AY 2018-19

Bench: Shri Sanjay Garg & Shri Narendra Prasad Sinhaआयकर अपील सं /Ita No.912/Ahd/2024 िनधा"रण वष" /Assessment Year : 2018-19 Arvind Lifestyle Brands Ltd. The Pcit, Ahmedabad-1 बनाम/ Formerly Knowns As Ahmedabad – 380 015 V/S. Arvind Retail Ltd. Arvind Mills Premises Naroda Road Ahmedabad – 382 345 "थायी लेखा सं./Pan: Aaach 7252 A (अपीलाथ'/ Appellant) (!( यथ'/ Respondent) Assessee By : Shri Vartik Chokshi, Ar Revenue By : Shri Alpesh Parmar, Cit-Dr सुनवाई की तारीख/Date Of Hearing : 15/09/2025 घोषणा की तारीख /Date Of Pronouncement: 09/12/2025 आदेश/O R D E R Per Sanjay Garg: The Present Appeal Has Been Preferred By The Assessee Against The Revision Order Passed By The Principal Commissioner Of Income Tax, Ahmedabad-1 (Hereinafter Referred To As “Pcit”) Dated 12/03/2024 U/S.263 Of The Income Tax Act, 1961 (Hereinafter Referred To As “The Act”) For The Assessment Year (Ay) 2018-19. 2. At The Outset, The Ld. Counsel For The Assessee Has Invited Our Attention To The Impugned Order Of The Ld. Pcit To Show That The Ld. Pcit Has Arvind Lifestyle Brands Ltd., Formerly Known As Arvind Retail Ltd., Vs. Pr.Cit Asst. Year : 2018-19

For Appellant: Shri Vartik Chokshi, ARFor Respondent: Shri Alpesh Parmar, CIT-DR
Section 263Section 40

Smart Lifestyle Multi Trade Private Limited, Bhubaneswar vs. ITO, Ward-1(4), Bhubaneswar

In the result, appeal of the assessee stands partly allowed

ITA 384/CTK/2025[2012-13]Status: DisposedITAT Cuttack03 Dec 2025AY 2012-13

Bench: Shri George Mathan & Shri Rajesh Kumarआयकर अपील सं/Ita No.384/Ctk/2025 ("नधा"रण वष" / Assessment Year : 2012-13 ) Smart Lifestyle Multitrade Pvt Ltd., Vs Ito, Ward 1(4), B/190, Bda Housing Colony, Bhubaneswar Baramunda, Bhubaneswar Pan No. : Aancs 4516 R (अपीलाथ" /Appellant) .. (""यथ" / Respondent) "नधा"रती क" ओर से /Assessee By : Shri P.R.Mohanty, Adv राज"व क" ओर से /Revenue By : Shri Vijaya Singh, Ld Sr Dr सुनवाई क" तार"ख / Date Of Hearing : 3 /12/2025 : 3 /12/2025 घोषणा क" तार"ख/Date Of Pronouncement आदेश / O R D E R Per Bench : This Is An Appeal Filed By The Assessee Against The Order Dated 13.6.2025 Passed By Ld Jcit(A)-3, Chennai In Appeal No.Cit(A), Bhubaneswar- 1/10162/2019-20 For The Assessment Year 2012-13. 2. Shri P.R.Mohanty,Fs Ld Ar Appeared For The Assessee & Shri Vijaya Singh, Ld Sr Dr Appeared For The Revenue. 3. It Was Submitted By Ld Ar That The Assessee Is In The Business Of Real Estate. It Was The Submission That The Return Filed By The Assessee Came To Be Processed & Assessment Came To Be Completed Us.143(3) Of The Act, In Which An Addition Of Rs.1,00,000/- Has Been Made In Respect Of Advertisement Charges Paid To Sister Concern. It Was The Submission That The Assessing Officer Had 2 आयकर अपील सं/Ita No.384/Ctk/2025 ("नधा"रण वष" / Assessment Year : 2012-13 )

For Appellant: Shri P.R.Mohanty, AdvFor Respondent: Shri Vijaya Singh, ld Sr DR
Section 194Section 40