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