Income Tax Act, 2025
Section 3: Clause (d) omitted by Act 26 of 1988, s. 11 (w.e.f. 11989).
3. Clause (d) omitted by Act 26 of 1988, s. 11 (w.e.f. 11989).
225
1[40A. Expenses or payments not deductible in certain circumstances.—(1) The provisions of this
section shall have effect notwithstanding anything to the contrary contained in any other provision of this
Act relating to the computation of income under the head “Profits and gains of business or profession”.
(2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be
made to any person referred to in clause (b) of this sub-section, and the 2[Assessing Officer] is of opinion
that such expenditure is excessive or unreasonable having regard to the fair market value of the goods,
services or facilities for which the payment is made or the legitimate needs of the business or profession
of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so
considered by him to be excessive or unreasonable shall not be allowed as a deduction:
3[Provided that 4[for an assessment year commencing on or before the 1st day of April, 2016] no
disallowance, on account of any expenditure being excessive or unreasonable having regard to the fair
market value, shall be made in respect of a specified domestic transaction referred to in section 92BA, if
such transaction is at arm's length price as defined in clause (ii) of section 92F.]
(b) The persons referred to in clause (a) are the following, namely:—
(i) where the assessee is an individual any relative of the assessee;
(ii) where the assessee is a company, any director of the company, partner of the firm,
firm, association of persons or or member of the association or family, or any
Hindu un-divided family relative of such director, partner or member;
(iii) any individual who has a substantial interest in the business or profession of the assessee, or
any relative of such individual;
(iv) a company, firm, association of persons or Hindu undivided family having a substantial
interest in the business or profession of the assessee or any director, partner or member of such
company, firm, association or family, or any relative of such director, partner or member 5[or any
other company carrying on business or profession in which the first mentioned company has
substantial interest;]
(v) a company, firm, association of persons or Hindu undivided family of which a director,
partner or member, as the case may be, has a substantial interest in the business or profession of the
assessee; or any director, partner or member of such company, firm, association or family or any
relative of such director, partner or member;
(vi) any person who carries on a business or profession,—
(A) where the assessee being an individual, or any relative of such assessee, has a substantial
interest in the business or profession of that person; or
omitted by Act 26 of 1988, s. 11 (w.e.f. 11989).
225
1[40A. Expenses or payments not deductible in certain circumstances.—
The provisions of this
section shall have effect notwithstanding anything to the contrary contained in any other provision of this
Act relating to the computation of income under the head “Profits and gains of business or profession”.
(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be
made to any person referred to in clause
of this sub-section, and the 2[Assessing Officer] is of opinion
that such expenditure is excessive or unreasonable having regard to the fair market value of the goods,
services or facilities for which the payment is made or the legitimate needs of the business or profession
of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so
considered by him to be excessive or unreasonable shall not be allowed as a deduction:
3[Provided that 4[for an assessment year commencing on or before the 1st day of April, 2016] no
disallowance, on account of any expenditure being excessive or unreasonable having regard to the fair
market value, shall be made in respect of a specified domestic transaction referred to in section 92BA, if
such transaction is at arm's length price as defined in clause
of section 92F.]
The persons referred to in clause
are the following, namely:—
where the assessee is an individual any relative of the assessee;
where the assessee is a company, any director of the company, partner of the firm,
firm, association of persons or or member of the association or family, or any
Hindu un-divided family relative of such director, partner or member;
any individual who has a substantial interest in the business or profession of the assessee, or
any relative of such individual;
a company, firm, association of persons or Hindu undivided family having a substantial
interest in the business or profession of the assessee or any director, partner or member of such
company, firm, association or family, or any relative of such director, partner or member 5[or any
other company carrying on business or profession in which the first mentioned company has
substantial interest;]
a company, firm, association of persons or Hindu undivided family of which a director,
partner or member, as the case may be, has a substantial interest in the business or profession of the
assessee; or any director, partner or member of such company, firm, association or family or any
relative of such director, partner or member;
any person who carries on a business or profession,—
where the assessee being an individual, or any relative of such assessee, has a substantial
interest in the business or profession of that person; or