Disallowance of Expenses

by Ram Dutt Sharma

Chapter
1. Introduction	1
2. Reasons for disallowance of Expenditure	9
3. Expenditure - Meaning and Connotation	10
4. Disallowance of Expenditure incurred in relation to Income exempt from Tax [Section 14] {Corresponding to Section 14A of the Income Tax Act, 1961}	14
5. Disallowance of interest paid in respect of capital borrowed for the purpose of business or profession [Section 32(1)(b)] {Corresponding to Section 36(1)(iii) of the Income Tax Act, 1961}	62
6. Disallowance for marked-to-market loss [Section 32(h)] {Corresponding to Section 40A(13) of the Income Tax Act, 1961}	100
7. General conditions for allowable deductions [Section 34] {Corresponding to Section 37(1) of the Income Tax Act, 1961}	106
8. Disallowance of Expenses for any purpose which is an offence or is prohibited by law [Section 34(2)(a)] {Corresponding to Explanation 1 to Section 37(1) of the Income Tax Act, 1961}	124
9. Disallowance of Corporate Social Responsibility (CSR) Expenditure [Section 34(2)(b)] {Corresponding to Explanation 2 to Section 37(1) of the Income Tax Act, 1961}	141
10. Expenditure on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party [Section 34(2)(c)] {Corresponding to Section 37(2B) of the Income Tax Act, 1961}	157
11. Disallowance of Capital Expenditure	167
12. Amounts not deductible in certain circumstances [Section 35(a)] {Corresponding to Section 40(a)(ii) & 40(a)(iia) of the Income Tax Act, 1961}	183
13. Disallowance on account of non-deduction of TDS [Section 35(b)(i)] {Corresponding to Section 40(a)(ia) of the Income Tax Act, 1961}	189
14. Any sum (other than salary) payable outside India or to a Non-resident [Section 35(b)(ii)] {Corresponding to Section 40(a)(i) of the Income Tax Act, 1961}	205
15. Payment to provident fund or other funds established for the benefit of employees of the assessee [Section 35(b)(iii)] {Corresponding to Section 40(a)(iv) of the Income Tax Act, 1961}	216
16. Salary payable outside India (or in India to a non-resident) without tax deduction [Section 35(c)] {Corresponding to Section 40(a)(iii) of the Income Tax Act, 1961}	218
17. Disallowance of certain fee, charge, etc. [Section 35(d)] {Corresponding to Section 40(a)(iib) of the Income Tax Act, 1961}	227
18. Disallowance of remuneration and interest paid by firm to partners [Section 35(e)] {Corresponding to Section 40(b) of the Income Tax Act, 1961}	235
19. Payment of Interest, Salary etc. made by AOP or BOI to its members [Section 35(f)] {Corresponding to Section 40(ba) of the Income Tax Act, 1961}	255
20. Assessing Officer's power to disallow excessive/unreasonable payments to "specified person" [Sections 36(2) & 36(3)] {Corresponding to Sections 40A(2)(a) & 40A(2)(b) of the Income Tax Act, 1961}	260
21. Disallowance for cash payments exceeding prescribed limit [Section 36(4)] {Corresponding to Section 40A(3) of the Income Tax Act, 1961}	282
22. Cash payments exceeding the prescribed limits under Section 36(4) but later convert these transactions into non-cash modes [Section 36(5)] {Corresponding to Section 40A(3A) of the Income Tax Act, 1961}	312
23. Certain deductions allowed on actual payment basis only [Section 37] {Corresponding to Section 43B of the Income Tax Act, 1961}	316
24. Ad hoc and Estimated disallowances of Expenses	336
25. Business Disallowance	354
26. Disallowance of Legal and Professional expenses	359
27. Disallowance of Expenses & Losses incurred for earning Illegal Income	365
28. Disallowance of expenses, in absence of any Evidence for expenses	369
29. Disallowance of expenses - Self made vouchers	380
30. Disallowance of Provisions for various expenses	388
31. Disallowance of Losses	402

About the Author

Ram Dutt Sharma

Ram Dutt Sharma was born on 27th June, 1958 in Narnaul, Haryana. He got his post-graduation from M.D. University, Rohtak in 1980. He joined the Income-tax Department in the year 1983 and retired as Income Tax Officer on 30.06.2018. He worked at various stations of North-West Region of Income-tax Department. He has wide experience of all wings of Income-tax Department such as Assessment Unit, Special Range, TDS Wing, Investigation Wing, etc. He has been Contributing articles and addressing on topics relating to Income Tax at NADT Regional Campus, Chandigarh & Bhopal. He has also addressed number of seminars organized by the Income-tax Department, Chartered Accountants, Advocates and various Trade Associations.

He is recipient of first-ever Finance Minister's Award 2017, the Income Tax Departments highest honour for sustained devotion, commitment to duty & promoting excellence in the field of Direct Taxation at National Level. The Hon'ble Union Finance Minister, Shri ArunJaitley conferred this Finance Ministers Award for Excellence for his meritorious services at VigyanBhawan, New Delhi on 24.07.2017.

Awarded by Hon'ble Member (Revenue& TPS), CBT, Special Secretary to the Government of India Certificate of Appreciation for his contribution recognized and included in the chapter Miscellaneous Orders in Let Us Share A compilation of Best Practices & Orders Vol. VIII released on 31stOctober, 2016.

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