Section 40A(2)(a) of the Income Tax Act

Income-tax Act, 2025: s.36

Section 40A(2)(a) falls under section 40A of the Income-tax Act, 1961, which corresponds to section 36 (Expenses or payments not deductible in certain circumstances) of the Income-tax Act, 2025.

Read section 36 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 40A(2)(a) is CIT v. Krishna SSK (211 Taxmann 109), cited in 102 of the 266 judgments on BharatTax that turn on this section.

Leading authorities on Section 40A(2)(a)

CIT v. Krishna SSK
211 Taxmann 109 · 2012 · Supreme Court
102
citing judgments

The Supreme Court in CIT v. Krishna SSK establishes principles for de novo assessment of co-operative sugar factories concerning the tax implications of sugar sales to members, acknowledging that such sales are regulated under Section 79(A) of the Maharashtra Co-operative Societies Act, 1960. These principles guide the computation of total income from these regulated transactions.

Climate Systems India Ltd. v. CIT
319 ITR 109 · 2009 · High Court
67
citing judgments
CIT v. Realest Builders & Services Ltd.
307 ITR 202 · 2008 · Supreme Court
64
citing judgments
Kesoram Industries & Cotton Mills Ltd. v. CIT
196 ITR 845 · 1992 · High Court
61
citing judgments

Expenditure incurred for exploring the feasibility of expanding or extending an existing business by setting up a new unit in the same line of business is revenue expenditure, not capital expenditure. Such expenditure, including obtaining project reports or legal opinions on desirability or feasibility, does not constitute the setting up of a new business.

CIT v. Priya Village Roadshows Ltd.
332 ITR 594 · 2011 · High Court
52
citing judgments

Expenditure incurred for starting a new business is capital in nature, irrespective of whether the project materializes. The essential purpose for which an expenditure is incurred determines its character as capital or revenue under Section 37(1).

Trib.) Goldman Sachs Services (P) Ltd. v. JCIT
117 Taxmann.com 535 · 2020 · ITAT
30
citing judgments

Donations eligible for deduction under Section 80G can be remitted back to the Assessing Officer for verification of receipts and eligibility.

CIT v. V.S. Dempo & Co. Pvt. Ltd.
336 ITR 209 · 2011 · High Court
27
citing judgments

Disallowance under Section 40A(2)(b) is not maintainable when both the payer and payee are assessed at the maximum marginal rate, as it results in a revenue-neutral situation.

Velankani Information Systems Ltd. v. DCIT
97 Taxmann.com 599 · 2018 · ITAT
24
citing judgments

Interest paid on delayed remittances of service tax is compensatory in nature and not a penalty hit by the Explanation to Section 37(1) of the Income Tax Act, 1961, making it a allowable business expenditure.

Bennet Coleman & Co. Ltd. v. V.P. Damle, Third ITO
157 ITR 812 · 1986 · High Court
22
citing judgments

Interest chargeable under section 201(1A) of the Income Tax Act is not penal in nature and therefore cannot be waived on the basis of intentional default or other grounds.

D. T. & T. D. C. Ltd. v. CIT
324 ITR 234 · 2010 · High Court
19
citing judgments

A mere change of opinion by the Assessing Officer, without any new material coming on record, is not a valid ground for reopening an assessment under section 147 of the Income-tax Act, especially after the expiry of four years from the end of the relevant assessment year.

Judgments on Section 40A(2)(a)

Advance Steel Tubes Ltd., Kolkata vs. DCIT, Cir-3, Kolkata

In the result, appeal of the assessee is allowed

ITA 412/KOL/2015[2010-2011]Status: DisposedITAT Kolkata15 Dec 2017AY 2010-2011

Bench: Shri A. T Varkey, Jm &Dr. A.L.Saini, Am आयकरअपीलसं./Ita No.412/Kol/2015 (िनधा"रणवष" / Assessment Year: 2010-11 Advance Steel Tubes Ltd. Vs. Ito, Ward-24(4), Hooghly C/O R.B. Singh, Advocate, 11, D.C. Of I.T.Circle-3, P-7, Crooked Lane, 1St Floor, Room Chowringhee Square, 4Th No.2, Kolkata – 700 069. Floor, Kolkata – 69. "थायीलेखासं./जीआइआरसं./Pan/Gir No. :Aacca 6765 B (Assessee) .. (Respondent) Assessee By : Shri Subash Agarwal, Advocate Respondent By : Shri Sallong Yaden, Addl. Cit सुनवाईकीतारीख/ Date Of Hearing : 21/09/2017 घोषणाकीतारीख/Date Of Pronouncement : 15/12/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Assessee, Pertaining To Assessment Year 2010-11, Is Directed Against The Order Passed By The Ld. Commissioner Of Income Tax (Appeals)–1, Kolkata, In Appeal No.107/Cit(A)-1/C-3/2013-14 Dated 31.12.2014 Which In Turn Arises Out Of An Order Passed By The Ao U/S.143(3) Of The Income Tax Act 1961, (Hereinafter Referred To As The ‘Act’) Dated 01.03.2013. 2. The Grounds Of Appeal Raised By The Assessee Are As Follows: 1) For That The Learned Commissioner Of Income Tax (Appeals) Should Have Accepted The Contention Of The Assessee That Disallowance On Interest Payment Of Rs.22,80,000/- Which Was Covered U/S.40A(2)(A) Made By The Assessing Officer Was Illegal & He Acted Wrongly In Confirming The Disallowance On Alleged Grounds.

For Appellant: Shri Subash Agarwal, AdvocateFor Respondent: Shri Sallong Yaden, Addl. CIT
Section 133(6)Section 143(3)Section 36Section 40A(2)(a)

Smt. Navdeep Kaur, Kolkata vs. ITO Ward 40(1), Kolkata

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

ITA 80/KOL/2017[2010-11]Status: DisposedITAT Kolkata27 Sept 2017AY 2010-11

Bench: Hon’Ble Shri P.M. Jagtap] I.T.A. No. 80/Kol/2017 Assessment Year : 2010-11 Smt. Navdeep Kaur.............................………………………………………………Appellant 1/A Bindu Basini Street Kolkata - 700027 [Pan : Alxpk0019K] Income Tax Officer...................……………………………………………….......Respondent Ward No. 40(1), Kolkata 3, Government Place West, Kolkata - 700001 Appearances By: Shri Manish Tiwari, Ar Appearing On Behalf Of The Assessee. Shri Soumyajit Dasgupta, Jcit Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : September 05, 2017 Date Of Pronouncing The Order : September 27, 2017 Order This Appeal Filed By The Assessee Is Directed Against The Order Of Ld. Cit (Appeals) – 12, Kolkata Dated 26.10.2016. 2. The Issue Raised In Ground No 1 Relates To The Addition Of Rs. 25,56,104/- Made By The Ao & Confirmed By The Ld. Cit (A) On Account Of Discrepancies Found In The Transactions Entered Into By The Assessee With Two Parties. 3. The Assessee In The Present Case Is An Individual Who Is Engaged In The Business Of Transportation In The Name & Style Of Her Proprietary Concern Of M/S. Saini Transways. The Return Of Income For The Year Under Consideration Was Filed By Her On 11.10.2010

Section 133(6)Section 143(3)