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 D. D. Infotech, Kolkata vs. Income Tax Officer -Ward 50(1), Kolkata

In the result, both appeals filed by the assessee (i

ITA 31/KOL/2014[2008-09]Status: DisposedITAT Kolkata28 Oct 2016AY 2008-09

Bench: Shri K. Narasimha Chary, Jm & Dr. A.L.Saini, Am आयकर अपील सं./Ita Nos.30 & 31/Kol/2014 ("नधा"रण वष" / Assessment Year :2007-08 & 2008-09) M/S D.D.Infotech, Vs. Ito, Ward-50(1), Kolkata 79/1, K.N.C.Road, Barasat, North 24 Parganas-700124 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaffd 9070 L .. (अपीलाथ" /Appellant) (""यथ" / Respondent) "नधा"रती क" ओर से /Assessee By : Shri Suvam Das, Advocate राज"व क" ओर से /Revenue By : Shri Pinaki Mukharjee, Jcit सुनवाई क" तार"ख / Date Of Hearing : 21/10/2016 घोषणा क" तार"ख/Date Of Pronouncement 28/10/2016 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Above Cited Two Appeals, Filed By The Assessee, Pertaining To The Assessment Years 2007-2008 & 2008-09, Are Directed Against The Orders Passed By Ld. Commissioner Of Income Tax (Appeals)- Xxxii, Kolkata, In Appeal Nos.33&34/Xxxii/10-11/50(1)/Kol, Dated 17.09.2013, Which In Turn Arise Out Of Assessment Orders Passed By The Assessing Officer (Ao) Under Section143(3)/147 Of The Income Tax Act 1961, (In Short The ‘Act’), Dated 08.06.210. 2. The Above Mentioned To Appeals Relate To Same Assessee, Different Assessment Years, Common Issues Involved, Therefore, These Have Been Clubbed & Heard Together & A Consolidated Order Is Being Passed For The Sake Of Convenience & Brevity. 3. Brief Facts Of The Case Qua The Issue Is That The Ao Has Added A Sum Of Rs.10,30,926/- For Assessment Year 2007-08 & Rs.9,28,440/- For D.D.Infotech

For Appellant: Shri Suvam Das, AdvocateFor Respondent: Shri Pinaki Mukharjee, JCIT
Section 143(3)

M/S D. D. Infotech, Kolkata vs. Income Tax Officer -Ward 50(1), Kolkata

In the result, both appeals filed by the assessee (i

ITA 30/KOL/2014[2007-2008]Status: DisposedITAT Kolkata28 Oct 2016AY 2007-2008

Bench: Shri K. Narasimha Chary, Jm & Dr. A.L.Saini, Am आयकर अपील सं./Ita Nos.30 & 31/Kol/2014 ("नधा"रण वष" / Assessment Year :2007-08 & 2008-09) M/S D.D.Infotech, Vs. Ito, Ward-50(1), Kolkata 79/1, K.N.C.Road, Barasat, North 24 Parganas-700124 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaffd 9070 L .. (अपीलाथ" /Appellant) (""यथ" / Respondent) "नधा"रती क" ओर से /Assessee By : Shri Suvam Das, Advocate राज"व क" ओर से /Revenue By : Shri Pinaki Mukharjee, Jcit सुनवाई क" तार"ख / Date Of Hearing : 21/10/2016 घोषणा क" तार"ख/Date Of Pronouncement 28/10/2016 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Above Cited Two Appeals, Filed By The Assessee, Pertaining To The Assessment Years 2007-2008 & 2008-09, Are Directed Against The Orders Passed By Ld. Commissioner Of Income Tax (Appeals)- Xxxii, Kolkata, In Appeal Nos.33&34/Xxxii/10-11/50(1)/Kol, Dated 17.09.2013, Which In Turn Arise Out Of Assessment Orders Passed By The Assessing Officer (Ao) Under Section143(3)/147 Of The Income Tax Act 1961, (In Short The ‘Act’), Dated 08.06.210. 2. The Above Mentioned To Appeals Relate To Same Assessee, Different Assessment Years, Common Issues Involved, Therefore, These Have Been Clubbed & Heard Together & A Consolidated Order Is Being Passed For The Sake Of Convenience & Brevity. 3. Brief Facts Of The Case Qua The Issue Is That The Ao Has Added A Sum Of Rs.10,30,926/- For Assessment Year 2007-08 & Rs.9,28,440/- For D.D.Infotech

For Appellant: Shri Suvam Das, AdvocateFor Respondent: Shri Pinaki Mukharjee, JCIT
Section 143(3)

M/S Pappu Garments, Kolkata vs. ITO, WD-28(4), Kolkata

In the result, appeal filed by assessee is allowed for statistical purposes

ITA 259/KOL/2014[2010-2011]Status: DisposedITAT Kolkata26 Oct 2016AY 2010-2011

Bench: Shri K. Narasimha Chary, Jm & Dr. A.L.Saini, Am आयकर अपील सं./Ita No.259/Kol/2014 ("नधा"रण वष" / Assessment Year :2010-2011) M/S Pappu Garments, Vs. Ito Ward-28(4), Kolkata, 2 62/1, Tollygunge Circular, Gariahat Road, (South), Kolkata-700053 Kolkata-700068 "थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aagfp 9974 L .. (अपीलाथ" /Appellant) (""यथ" / Respondent) "नधा"रती क" ओर से /Assessee By : Shri Malay Dhar & Sankha Sadhu, Advocate राज"व क" ओर से /Revenue By : Shri Banibrata Dutta, Adcit सुनवाई क" तार"ख / Date Of Hearing : 19/10/2016 घोषणा क" तार"ख/Date Of Pronouncement 26/10/2016 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Assessee, Pertaining To The Assessment Year 2010-2011, Is Directed Against An Order Passed By Ld. Commissioner Of Income Tax (Appeals)-Xiv, Kolkata In Appeal No.180/Cit(A)-Xiv/2012-13, Dated 31.10.2013, Which In Turn Arises Out Of An Order Passed By The Assessing Officer (Ao) Under Section143(3) Of The Income Tax Act 1961, (In Short The ‘Act’), Dated 06.12.2012. 2. The Facts Of The Case Qua The Assessee Are That The Assessee Filed Its Return Of Income On 19.08.2010 Showing Total Income Of Rs.2,75,880/-. The Assessee’S Case Was Selected For Scrutiny U/S.143(3) Of The Act & The Ao Completed The Assessment By Making Addition Of Rs.28,73,299/- On Account Of Stitching Charges. The Ao Observed That The Assessee Did Not Deduct The Tds U/S.194C(1) Of The Act While Making Payment To The Contractors/Sub-Contractors, Therefore, The Addition Was Made.

For Appellant: Shri Malay DharFor Respondent: Shri Banibrata Dutta, ADCIT
Section 143(3)Section 194C(1)Section 40