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)
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
