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)

J.C.I.T RG - 3, Asansol vs. M/S Pawan Hardcoke Industries, Burdwan

In the result, appeal filed by the Revenue on ground No

ITA 406/KOL/2013[2008-09]Status: DisposedITAT Kolkata19 Apr 2017AY 2008-09

Bench: Shri N.V.Vasudevan, Jm & Dr. A.L.Saini, Am आयकर अपील सं./Ita No.406/Kol/2013 ("नधा"रण वष" / Assessment Year : 2008-09) Jcit, Range-3, Asansol Vs. M/S Pawan Hardcoke Parmar Building, 54, Industries, G.T.Road (West), Asansol- Bhukania House, Pera Galli, 713304 Kachari Road, Barakar, Burdwan "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aadfp 4056 E .. (अपीलाथ" /Appellant) (""यथ" / Respondent) राज"व क" ओर से /Revenue By : Shri Rajat Kumar Kureel, Jcit-Dr "नधा"रती क" ओर से /Assessee By : Shri T.P.Roy, Advocate सुनवाई क" तार"ख / Date Of Hearing : 03/04/2017 घोषणा क" तार"ख/Date Of Pronouncement 19/04/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Revenue, Is Directed Against The Order Passed By The Ld. Commissioner Of Income Tax (Appeals), Durgapur In Appeal No.108/Cit(A)/Asl/Cir-2/Asl/2010-11,Which In Turn Arises Out Of An Order Passed By The Assessing Officer U/S.144 Of The Income Tax Act 1961, (Hereinafter Referred To As The ‘Act’), Dated 25.10.2010. 2. Brief Facts Of The Case Qua The Assessee Are That The Assessee Is A Partnership Firm Engaged In The Business Of Manufacturing Of Coke Both Hardcoke & Soft Coke. The Assessee Is Doing Business In The Name Of M/S Pawan Hardcoke Industries, Which Is A Partnership Firm Consisting Of Two Partners. The Return Of Income Of The Assessee Was Processed U/S.143(1) Of The Act. Later On, Assessee’S Case Was Selected For Scrutiny U/S.143(3) Of The Act & The Ao Completed The Assessment By Making Addition On Account Of Unexplained Cash Credit U/S.68 Of The Act. The Assessing Officer Also Disallowed The Transportation Charges At Rs.12,85,223/- & Disallowed Some Expenditure Under Different Heads.

For Appellant: Shri T.P.Roy, AdvocateFor Respondent: Shri Rajat Kumar Kureel, JCIT-DR
Section 133(6)Section 143(1)Section 143(3)Section 144Section 68

J.C.I.T Range - 56, Kolkata vs. M/S Arti & Sons., Kolkata

In the result, the appeal filed by the Revenue on ground No

ITA 1932/KOL/2012[2009-10]Status: DisposedITAT Kolkata19 Apr 2017AY 2009-10

Bench: Shri N.V.Vasudevan, Jm & Dr. A.L.Saini, Am आयकर अपील सं./Ita No.1932/Kol/2012 ("नधा"रण वष" /Assessment Year:2009-2010) Jcit, Range-56, 3, Govt Place Vs. M/S Arti & Sons, (W), 2Nd Floor, Kolkata-700001 167/4, Lenin Sarani, 2Nd Floor, Kolkata-700072 "थायी लेखा सं./जीआइआर सं./Pan/Gir No.: Aaefa 6622 J .. (अपीलाथ" /Appellant) (""यथ" / Respondent) Assessee By : Shri G.Mallikarjuna, Cit Dr Revenue By : Shri V.N.Purohit, Ar सुनवाई क" तार"ख / Date Of Hearing : 09/03/2017 घोषणा क" तार"ख/Date Of Pronouncement 19/04/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Revenue Pertaining To The Assessment Year 2009-2010, Is Directed Against The Order Passed By Ld. Cit(A)-Xxxvi, Kolkata In Appeal No.357/Cit(A)-Xxxvi/Kol/R-56/10-11, Dated 29.10.2012, Which In Turn Arises Out Of An Order Passed By The Assessing Officer (Ao) Under Section 143(3) Of The Income Tax Act 1961, (Hereinafter Referred To As The ‘Act’), Dated 30.12.2010. 2. Brief Facts Of The Case Qua The Assessee Are That The Assessee Filed Its E-Return Of Income, Disclosing Total Income Of Rs.99,12,640/- On 22.09.2008. The Assessee’S Case Was Selected For Scrutiny U/S.143(3) Of The Act & The Ao Has Completed The Assessment By Making Addition On Account Of Gross Receipts From C&F Commission At Rs.5,33,81,892/- & On Account Of Undisclosed Liabilities Paid Through Credits In The Books Of Tiger Associates At Rs.7,12,32,585/-.

For Appellant: Shri G.Mallikarjuna, CIT DRFor Respondent: Shri V.N.Purohit, AR
Section 143(3)Section 194G(1)Section 40Section 40a