Section 40A(7) of the Income Tax Act

Income-tax Act, 2025: s.36

Section 40A(7) 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(7) is CIT v. Gujarat State Road Transport Corporation (366 ITR 170), cited in 1,158 of the 268 judgments on BharatTax that turn on this section.

Leading authorities on Section 40A(7)

CIT v. Gujarat State Road Transport Corporation
366 ITR 170 · 2014 · High Court
1,158
citing judgments

Employees' contributions to welfare funds, such as provident fund, are not allowable as a deduction under section 36(1)(va) if deposited beyond the due date prescribed under the respective welfare statutes, even by a single day. Such delayed deposits are not cured even if made before the income-tax return filing due date.

Price Waterhouse Coopers Pvt. Ltd. v. CIT
348 ITR 306 · 2012 · Supreme Court
359
citing judgments

Penalty under section 271(1)(c) for furnishing inaccurate particulars cannot be imposed for a mere disallowance, bona fide mistake, or inadvertent error, especially when relevant facts are disclosed in the tax audit report. The levy of penalty requires proof of intent to conceal income or furnish false particulars.

Allied Motors (supra); CIT v. Podar Cement Pvt Ltd.
226 ITR 625 · 1997 · Supreme Court
244
citing judgments

Amendments to tax laws that are explanatory, declaratory, curative, or clarificatory in nature are judicially construed as retrospective, especially if they are intended to remedy unintended consequences.

Kalpesh Synthetics (P.) Ltd. v. DCIT
137 Taxmann.com 475 · 2022 · ITAT
198
citing judgments

A deduction claimed under Section 36(1)(va) for employee contributions remitted after the statutory due date but before the return filing due date cannot be disallowed during intimation processing under Section 143(1) if the issue is debatable. Such a disallowance cannot be made automatically based solely on auditor's mention of actual vs. due dates in the tax audit report.

100/223 Taxman 398/366 ITR 170 (Guj.) 3. CIT v. Merchem Ltd.
61 Taxmann.com 119 · 2015 · High Court
168
citing judgments

An amendment clarifying the disallowance of employee contributions under sections 36(1)(va) and 43B is prospective. Therefore, before such amendment, employee contributions paid before the due date for filing the income tax return are deductible.

378 ITR 443 (Kerala); and Unifac Management Services (India) P. Ltd. v. Asst. CIT
409 ITR 225 · 2018 · High Court
67
citing judgments

The beneficial provisions of Section 43B do not apply to sums covered by Section 36(1)(va), which are employee contributions to welfare funds. The scope of Section 43B and Section 36(1)(va) are distinct, meaning belated payment of employee contributions is not deductible under Section 43B, and only Section 36(1)(va) read with Section 2(24)(x) governs their deductibility.

Foundry (P.) Ltd. v. CIT
78 Taxmann.com 47 · 2017 · High Court
64
citing judgments

An employer can claim deduction for employee contributions to provident fund or ESI under Section 36(1)(va) if these sums are deposited on or before the due date for filing the income tax return under Section 139, extending the benefit of Section 43B to such payments.

CIT v. Bharat 42 Zuari Cement Limited, Kadapa Aluminium Co. Ltd.
303 ITR 256 · 2008 · High Court
45
citing judgments

An assessee can file a revised computation of income during ongoing assessment proceedings, even after the time limit for filing a revised return under section 139(5) has expired. This revised computation can be submitted without filing a revised return.

Goerge v. State of Kerala
3 SCC 557 · 2007 · Reported
35
citing judgments

A later Supreme Court decision retrospectively clarifies the law, superseding earlier incorrect interpretations, as judges discover and find the correct law rather than make it.

CIT v. Malayala Manorama Co. Ltd.
253 ITR 791 · 2018 · High Court
32
citing judgments

An Assessing Officer cannot allow a claim for deduction that is raised afresh unless a revised return is filed. However, an assessee is not disabled from raising such a claim before appellate authorities if it was disallowed by the Assessing Officer for the technical reason of not filing a revised return.

Judgments on Section 40A(7)

Vellanikkara Service Co Operative Bank, Thrissur vs. Income Tax Officer Ward 2(1), Thrissur

In the result, appeal filed by the assessee is dismissed

ITA 846/COCH/2023[2018-19]Status: DisposedITAT Cochin23 Jan 2025AY 2018-19

Bench: Shri Inturi Rama Rao, Am Assessment Year: 2018-19 Vellanikkara Service Co-Op. Bank Ltd. .......... Appellant Madakathara, Thrissur 680651 [Pan: Aaaav7463M] Vs. The Income Tax Officer .......... Respondent Ward - 2(1), Thrissur Appellant By: ------- None ------- Respondent By: Smt. Leena Lal, Sr. D.R. Date Of Hearing: 17.01.2025 Date Of Pronouncement: 23.01.2025 O R D E R This Appeal Filed By The Assessee Is Directed Against The Order Of The National Faceless Appeal Centre, Delhi [Cit(A)] Dated 22.08.2023 For Assessment Year (Ay) 2018-19. 2. The Appellant Is A Primary Agricultural Co-Operative Society Registered Under The Kerala State Co-Operative Societies Act, 1969. The Appellant Filed The Return Of Income For Ay 2018-19 On 27.10.2018 Declaring Nil Income After Claiming Deduction U/S. 80P Of The Income Tax Act, 1961 (The Act) Of Rs. 3,99, 21,348/-. Against The Said Return Of Income, The Assessment Was Completed By The Income Tax Officer, Ward -2(1), Thrissur (Hereinafter Called "The Ao") Vide Order Dated 03.03.2021 Passed U/S. 143(3) Of The Act At A 2 Vellanikkara Service Co-Op. Bank Ltd. Total Income Of Rs. 4,11,71,348/- Denying Deduction U/S. 80P Of The Act.

For Appellant: ------- None -------For Respondent: Smt. Leena Lal, Sr. D.R
Section 143(3)Section 36(1)Section 40A(7)Section 80P