Section 40(a)(ii) of the Income Tax Act

Income-tax Act, 2025: s.35

Section 40(a)(ii) 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)(ii) is Sesa Goa Ltd. v. JCIT (117 Taxmann.com 96), cited in 291 of the 393 judgments on BharatTax that turn on this section.

Leading authorities on Section 40(a)(ii)

Sesa Goa Ltd. v. JCIT
117 Taxmann.com 96 · 2020 · High Court
291
citing judgments

Education cess paid on total income and dividend distribution tax are allowable deductions for income tax purposes.

CIT v. Yokogawa India Ltd.
341 ITR 385 · 2012 · High Court
270
citing judgments

A provision for doubtful debts cannot be added back while computing book profits under Section 115JB of the Income-tax Act for Minimum Alternate Tax (MAT) purposes.

CIT v. K. Srinivasan
83 ITR 346 · 1972 · Supreme Court
129
citing judgments

The term 'tax' includes surcharge and cess. Surcharge and additional surcharge are considered components of income tax, which can be levied as a basic charge, surcharge, special surcharge, and additional surcharge.

M.M. Aqua Technologies Ltd. v. Commissioner of Income Tax, Delhi
2021 SCC OnLine SC 575 · 2021 · Reported
102
citing judgments

A tax provision is retrospective only if legislative intent is explicit or if it is purely clarificatory and does not alter existing law. Provisions framed 'for the removal of doubts' are not presumed to be retrospective if they change the law as it stood.

Chambal Fertilisers & Chemicals Ltd. v. JCIT
107 Taxmann.com 484 · 2019 · High Court
49
citing judgments

Education cess paid by an assessee is not allowable as a deduction under Section 37 read with Section 40(a)(ii) of the Income Tax Act, as it is considered a 'tax'. This position was affirmed by the Supreme Court in a later decision.

CIT v. Raymond Ltd.
21 Taxmann.com 60 · 2012 · High Court
48
citing judgments

The amount transferred to Debenture Redemption Reserve is to be excluded when computing book profit under section 115JB for the purpose of Minimum Alternate Tax.

Tata Iron and Steel Co. Ltd. & Ors. v. State of Bihar
48 ITR 123 · 1963 · Supreme Court
43
citing judgments

An integrated business engaged in captive consumption derives profits or value from its internal activities, even when intermediate products are not sold externally. The principle that a person cannot make profits out of himself does not apply to deny profits from such internal operations for tax or cess purposes.

DCIT v. Gloster Jute Mills Limited
88 Taxmann.com 738 · 2017 · ITAT
39
citing judgments

Additional depreciation under Section 32(1)(iia) can be claimed in the year an asset is acquired and installed, even if it is claimed in a subsequent year of acquisition and installation.

CIT v. Sulzer India Ltd.
369 ITR 717 · 2014 · High Court
38
citing judgments

Where an assessee discharges a future liability at its present value, it does not result in a "benefit" accruing to the assessee, and therefore, Section 41(1) of the Income Tax Act, 1961, is not applicable.

CIT v. Shri Goverdhan Ltd.
69 ITR 675 · 1968 · Supreme Court
37
citing judgments

Income accrues to an assessee when they acquire a right to receive it, even if it has not yet been actually received or quantified. A debt is created once liability is established, and its future quantification does not make it contingent.

Judgments on Section 40(a)(ii)

Tinplate Company of India, Kolkata vs. DCIT(CPC), Bangalore

In the result, the appeal of the assessee is treated as allowed for statistical

ITA 437/KOL/2020[2015-16]Status: DisposedITAT Kolkata11 Feb 2022AY 2015-16

Bench: Shri Aby T. Varkey, Hon’Ble & Shri Girish Agrawal, Hon’Ble) Assessment Year: 2015-16 M/S. The Tinplate Company Of India Limited.......................................………………….............Appellant 4, Bankshall Street Dalhousie Kolkata -700 001 [Pan : Aabct 0129 P] Vs. Deputy Commissioner Of Income Tax, (Cpc) Bangalore…….......................………..…......Respondent Appearances By: Shri Ketav Ved, Fca, Appeared On Behalf Of The Assessee. Shri Biswanath Das, Addl. Cit, Sr. D/R, Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : February 2Nd, 2022 Date Of Pronouncing The Order : February 11Th, 2022 Order Per Girish Agrawal:- This Appeal Filed By The Assessee Is Directed Against The Order Of The Learned Commissioner Of Income Tax (Appeals) - 6, Kolkata, (Hereinafter The ‘Ld. Cit(A)’), Dt. 18/03/2020. 2. The Assessee Has Raised The Following Grounds Of Appeal:- 1. That On The Facts & In The Circumstances Of The Case, The Ld. Cit(A) Erred In Not Allowing / Adjudicating The Issue Relating To Short Grant Of Credit For Dividend Distribution Tax Paid (Ddt) Of Inr 84,63,518/-. 2. That On The Facts & In The Circumstances Of The Case, The Ld. Cit(A) Erred In Not Allowing / Adjudicating The Issue Relating To Erroneous Levy Of Interest Under Section 115P Of The Act. 3. That On The Facts & In The Circumstances Of The Case & In Law, The Ld. Cit(A) Erred In Not Allowing / Adjudicating The Issue / Additional Ground Relating To Claim For Deduction Of Education Cess Debited In The Books Of Accounts Of The Appellant. 4. The Appellant Craves Leave To Add To Or Alter, By Deletion, Substitution Or Otherwise, Any Or All Of The Above Grounds Of Objections, At Any Time Before Or During The Hearing Of The Appeal. 5. The Appellant Submits That The Above Grounds Are Independent & Without Prejudice To One Another.

Section 10(4)Section 115PSection 40

Prima Private Ltd, Pune vs. Deputy Commissioner of Income-Tax, Circle - 10, Pune

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

ITA 1364/PUN/2018[2014-15]Status: DisposedITAT Pune19 Jan 2022AY 2014-15

Bench: Shri Inturi Rama Rao, Am & Shri Partha Sarathi Chaudhury, Jm आयकर अपील सं. / Ita No.1364/Pun/2018 िनधा"रण वष" / Assessment Year : 2014-15 Prima Private Ltd., Chaitanya, 774 Budhwar Peth, Pune- 411002. .......अपीलाथ" / Appellant Pan : Aabcp1938J बनाम / V/S. Dcit, Circle-10, ……""यथ" / Respondent Pune. Assessee By : Shri Sharad Shah Revenue By : Shri M. J. Jasnani सुनवाई क" तारीख / Date Of Hearing : 17.01.2022 घोषणा क" तारीख / Date Of Pronouncement : 19.01.2022 आदेश / Order Per Partha Sarathi Chaudhury, Jm: This Appeal Preferred By The Assessee Emanates From The Order Of The Ld. Cit(A)-6, Pune Dated 19.04.2018 As Per The Following Grounds Of Appeal On Record :- “On Facts & In Law & Without Prejudice To Each Other - 1. The Ld. A.O (And Ld. Cit(A)) Has Erred In Applying Rule 8D Without Justifying As To Why Assessee Is Not Correct In Applying Section 14A Of The Income-Tax Act, 1961. 2. The Ld. A.O. (And Ld. Cit(A)) Has Erred In Increasing Disallowance U/S 14 A By Rs. 14,24,055/- 2.1) The Ld. A.O. (And Ld. Cit(A)) Has Erred In Not Considering The Fact That Assessee Has Huge Reserves & Interest Free Funds.

For Appellant: Shri Sharad ShahFor Respondent: Shri M. J. Jasnani
Section 14Section 143(3)Section 14A

M/S Raptakos Brett and Co. Ltd, Mumbai vs. Dy CIT 5 (3)(1), Mumbai

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

ITA 260/MUM/2020[2013-14]Status: DisposedITAT Mumbai05 Jan 2022AY 2013-14

Bench: Shri Rajesh Kumar, Am & Shri Amarjit Singh, Jm आयकर अपील सं/ I.T.A. No.260/Mum/2020 (निर्धारण वर्ा / Assessment Year: 2013-14) बिधम/ M/S. Raptakos Brett & Co. Dcit, Range-5(3)(1) Ltd. Aaykar Bhavan, Mumbai- Vs. 21A, Mittal Tower, Nariman 400020. Point, Mumbai-400021. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaacr1772R (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee By: Shri Ronak Doshi Revenue By: Shri Raghuveer Madana सुनवाई की तारीख / Date Of Hearing: 18/11/2021 घोषणा की तारीख /Date Of Pronouncement: 05/01/2022 आदेश / O R D E R Per Amarjit Singh, Jm: The Assessee Has Filed The Present Appeal Against The Order Dated 11.11.2019 Passed By The Commissioner Of Income Tax (Appeals)-10, Mumbai (Hereinafter Referred To As The “Cit(A)”) Relevant To The A.Y.2013- 14. 2. The Assessee Has Raised The Following Grounds: - “Ground No. I: Disallowance Under Section 14A Of The Act R.W.R. 8D(2)(Iii) Of The Income Tax Rules. 1962 ('The Rules’) I. On The Facts & Circumstances Of The Case & In Law, The Cit(A) Erred In Upholding The Action Of The Assessing Officer ("Ao") To A.Y.2013-14 Disallow Expenses Incurred Towards Earning Exempt Income Under Section 14A Of The Act R.W.R. 8D(2)(Iii) The Rules.

For Appellant: Shri Ronak DoshiFor Respondent: Shri Raghuveer Madana
Section 10(34)Section 115JSection 143(2)Section 14ASection 40