Eastern Investments Ltd. v. CIT

38 ITR 601Supreme Court of India1960#222 most cited

What is Eastern Investments Ltd. v. CIT authority for?

Expenditure must be commercially expedient for carrying on the business, and it is not for revenue authorities to dictate how an assessee should conduct its business. The court will not question the business expediency of a transaction, even if a third party also benefits.

346

judgments rely on this decision, according to BharatTax’s citation analysis of 366,470 Indian tax judgments — from 2006 to 2026.

Also referred to as

Eastern Investments Ltd. v. CIT · 38 ITR 601 · commercial expediency · business expediency · related party transaction · enduring benefit · business expenditure · prudent businessman · disallowance of interest expenditure

Sections most often in play

Section 143(3)Section 147Section 148Section 14ASection 37Section 234BSection 40A(2)(b)Section 37(1)

Issues it is cited on

interest on interestaccumulated profitssection 40a(2)(b)commercial expediencyrelated party transactionbusiness expediencysection 194jenduring benefitsection 40a(2)section 14a(2)disallowance of interest expendituresection 36(1)(vii)

Judgments citing Eastern Investments Ltd. v. CIT

Frigoglass India Pvt. Ltd., Gurgaon vs. DCIT, New Delhi

In the result, the appeal of the assessee is partly allowed

ITA 1906/DEL/2015[2010-11]Status: DisposedITAT Delhi08 Apr 2016AY 2010-11

Bench: Shri S.V. Mehrotra & Shri Sudhanshu Srivastavaay: 2010-11 Frigoglas India Pvt. Ltd., Vs Dcit, Plot 26-A, Sector-3, Circle-9(2), Imt Manesar, New Delhi. Gurgaon. (Pan: Aaacf6804G) (Appellant) (Respondent) Appellant By: Shri Harpreet Singh, Adv. Shri Rophan Khare, Adv. Shri Gagandeep Nagpal, Ca Respondent By: Shri Amendra Kumar, Cit Dr Date Of Hearing: 11.01.2016 Date Of Pronouncement: 08.04.2016

For Appellant: Shri Harpreet Singh, AdvFor Respondent: Shri Amendra Kumar, CIT DR
Section 143(3)Section 92C

…e to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur. We may refer to a few of these authorities to elucidate the point. In Eastern Investment Ltd. v. CIT , (1951) 20 ITR 1, it was held by the Supreme Court that “there are usually many ways in which a given thing can be brought about in business circles but it is not for the Court to decide which of them should have been employed when the Court is deciding a question under Section 12(2) of the Income Tax Act”. It was further held in this case that “it is not necessary…

Merck Ltd, Mumbai vs. DCIT 7(2)(1), Mumbai

In the result, the appeal of the Assessing Officer for the assessment year

ITA 1222/MUM/2015[2009-10]Status: DisposedITAT Mumbai31 Mar 2016AY 2009-10
Section 133(6)Section 143(3)

…I.T.A. No. 1946/Mum/2014 I.T.A. Nos. 1172 and 1222/Mum/2015 Assessment years: 2009-10, 2010-11 Page 1 of 32 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘K’ BENCH, MUMBAI [Coram: Pramod Kumar AM and Pawan Singh JM] I.T.A. No. 1946/Mum/2014 Assessment year: 2009-10 Merck Limited ……….………………….Appellant Shiv Sagar Estate, ‘A’ Dr. Annie Besant Road, Worli, Mumbai 400018. [PAN: AAACE 2616F] Vs. ……..…………….…Respondent Dy. Commissioner of Income Tax Range 6 (3), Mumbai. I.T.A. No. 1222/Mum/2015 Assessment year: 2010-11 Merck Limited ……….………………….Appellant Shiv Sagar Estate, ‘A’ Dr. Annie Besant Road, Worli, Mumbai 400018. […

DCIT Cir 7(2)(1), Mumbai vs. Merck Ltd, Mumbai

In the result, the appeal of the Assessing Officer for the assessment year

ITA 1172/MUM/2015[2010-11]Status: DisposedITAT Mumbai31 Mar 2016AY 2010-11
Section 133(6)Section 143(3)

…I.T.A. No. 1946/Mum/2014 I.T.A. Nos. 1172 and 1222/Mum/2015 Assessment years: 2009-10, 2010-11 Page 1 of 32 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘K’ BENCH, MUMBAI [Coram: Pramod Kumar AM and Pawan Singh JM] I.T.A. No. 1946/Mum/2014 Assessment year: 2009-10 Merck Limited ……….………………….Appellant Shiv Sagar Estate, ‘A’ Dr. Annie Besant Road, Worli, Mumbai 400018. [PAN: AAACE 2616F] Vs. ……..…………….…Respondent Dy. Commissioner of Income Tax Range 6 (3), Mumbai. I.T.A. No. 1222/Mum/2015 Assessment year: 2010-11 Merck Limited ……….………………….Appellant Shiv Sagar Estate, ‘A’ Dr. Annie Besant Road, Worli, Mumbai 400018. […

Merck Ltd, Mumbai vs. DCIT RG 6(3), Mumbai

In the result, the appeal of the Assessing Officer for the assessment year

ITA 1946/MUM/2014[2009-10]Status: DisposedITAT Mumbai31 Mar 2016AY 2009-10
Section 133(6)Section 143(3)

…I.T.A. No. 1946/Mum/2014 I.T.A. Nos. 1172 and 1222/Mum/2015 Assessment years: 2009-10, 2010-11 Page 1 of 32 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘K’ BENCH, MUMBAI [Coram: Pramod Kumar AM and Pawan Singh JM] I.T.A. No. 1946/Mum/2014 Assessment year: 2009-10 Merck Limited ……….………………….Appellant Shiv Sagar Estate, ‘A’ Dr. Annie Besant Road, Worli, Mumbai 400018. [PAN: AAACE 2616F] Vs. ……..…………….…Respondent Dy. Commissioner of Income Tax Range 6 (3), Mumbai. I.T.A. No. 1222/Mum/2015 Assessment year: 2010-11 Merck Limited ……….………………….Appellant Shiv Sagar Estate, ‘A’ Dr. Annie Besant Road, Worli, Mumbai 400018. […

Fibres & Fabrics International P Ltd, Bangalore vs. Deputy Commissioner of Income Tax, Circel-11(3), Bangalore

In the result, the appeal filed by the assessee is allowed

ITA 1352/BANG/2014[2005-06]Status: DisposedITAT Bangalore10 Feb 2016AY 2005-06

Bench: Shri Vijaypal Rao & Shri Inturi Rama Raom/S.Fibres & Fabrics International Pvt. Ltd. No.21, E-1, 2Nd Phase, Peenya Industrial Area, Bangalore-560058. … Appellant Pan: Aaacf 6841 M Vs. Deputy Commissioner Of Income-Tax, Circle 11(3), Bangalore. … Respondent

For Appellant: Shri Nageswar Rao, AdvocateFor Respondent: Smt.Neera Malhotra, CIT(DR)
Section 147Section 253Section 32(1)(ii)

…IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, BANGALORE BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER M/s.Fibres & Fabrics International Pvt. Ltd. No.21, E-1, 2nd Phase, Peenya Industrial Area, Bangalore-560058. … Appellant PAN: AAACF 6841 M Vs. Deputy Commissioner of Income-tax, Circle 11(3), Bangalore. … Respondent Appellant by : Shri Nageswar Rao, Advocate Respondent by : Smt.Neera Malhotra, CIT(DR) Date of hearing : 10/12/2015 Date of pronouncement : 10/02/2016 O R D E R Per INTURI RAMA RAO, AM : This is an appeal filed by the assessee-company, directed against…

E-City Investments & Holdings Co. Pvt. Ltd., Mumbai vs. D.C.I.T. RG. 8(1) (OSD), Mumbai

The appeal of the assessee is allowed

ITA 8382/MUM/2011[2008-09]Status: DisposedITAT Mumbai03 Feb 2016AY 2008-09

Bench: Shri Joginder Singh & Shri Ashwani Tanejaassessment Year: 2008-09 E-City Investments & Holdings Dcit, Company Private Limited, Range-8(1)(Osd), बनाम/ 844/4, Shah Industrial Estate, Aayakar Bhavan, Vs. Off. New Link Road, Opp. M.K. Road, Laxmi Industrial Estate, Mumbai-400020 Andheri (West), Mumbai-400053 ("नधा"रती /Assessee) (राज"व /Revenue) Pan. No.Aaace8030F "नधा"रती क" ओर से / Assessee By Shri Vijay Mehta राज"व क" ओर से / Revenue By Mr.J. Saravanan -Dr

Section 143(3)Section 36(1)(iii)

…irectly to facilitate the carrying on the business. The above test in Atherton' s case [1925] 10 TC 155 (HL) has been approved by this court in several decisions, e.g., Eastern Investments Ltd. v. CIT [1951] 20 ITR 1, CIT v. Chandulal Keshavlal and Co. [1960] 38 ITR 601, etc. 25. In our opinion, the High Court as well as the Tribunal and other Income-tax authorities should have approached the question of allowability of interest on the borrowed funds from the above angle. In other words, the High Court and other authorities should have enquired as to whether the interest free loan was given to the sister company…

DCIT, New Delhi vs. M/S. Sara Services & Enginners Pvt. Ltd., New Delhi

In the results appeal of the assessee is partly disallowed on ground no

ITA 544/DEL/2010[2003-04]Status: DisposedITAT Delhi18 Jan 2016AY 2003-04

Bench: Sri C.M.Garg, Jm & Sri L.P.Sahu, Am Ita No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04

For Appellant: Sri O.P. Sapra, Sri Sandeep Sapara, Adv. , ShriFor Respondent: Sri Sujit kumar, Sr. DR & Smt. Sunita Kejriwal, CIT,DR
Section 143Section 143(1)Section 147Section 148Section 80H

…IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G ’, NEW DELHI Before Sri C.M.Garg, JM And Sri L.P.Sahu, AM ITA No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 Sara Services & Engineers Vs ACIT Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara C.R.Building. I.P.Estate India Pvt. Ltd. ) GL-3. Ashoka Estate-24, New Delhi Barakhamba Road, Connaught Place New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACS6857L ITA No. 543, 544/Del/2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 ACIT Vs Sara Services & Engineers Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara India Pvt…

DCIT, New Delhi vs. M/S. Sara Services & Enginners Pvt. Ltd., New Delhi

In the results appeal of the assessee is partly disallowed on ground no

ITA 543/DEL/2010[2002-03]Status: DisposedITAT Delhi18 Jan 2016AY 2002-03

Bench: Sri C.M.Garg, Jm & Sri L.P.Sahu, Am Ita No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04

For Appellant: Sri O.P. Sapra, Sri Sandeep Sapara, Adv. , ShriFor Respondent: Sri Sujit kumar, Sr. DR & Smt. Sunita Kejriwal, CIT,DR
Section 143Section 143(1)Section 147Section 148Section 80H

…IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G ’, NEW DELHI Before Sri C.M.Garg, JM And Sri L.P.Sahu, AM ITA No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 Sara Services & Engineers Vs ACIT Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara C.R.Building. I.P.Estate India Pvt. Ltd. ) GL-3. Ashoka Estate-24, New Delhi Barakhamba Road, Connaught Place New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACS6857L ITA No. 543, 544/Del/2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 ACIT Vs Sara Services & Engineers Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara India Pvt…

Sara Services & Engineers Pvt. Ltd., New Delhi vs. ACIT, New Delhi

In the results appeal of the assessee is partly disallowed on ground no

ITA 407/DEL/2010[2003-04]Status: DisposedITAT Delhi18 Jan 2016AY 2003-04

Bench: Sri C.M.Garg, Jm & Sri L.P.Sahu, Am Ita No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04

For Appellant: Sri O.P. Sapra, Sri Sandeep Sapara, Adv. , ShriFor Respondent: Sri Sujit kumar, Sr. DR & Smt. Sunita Kejriwal, CIT,DR
Section 143Section 143(1)Section 147Section 148Section 80H

…IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G ’, NEW DELHI Before Sri C.M.Garg, JM And Sri L.P.Sahu, AM ITA No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 Sara Services & Engineers Vs ACIT Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara C.R.Building. I.P.Estate India Pvt. Ltd. ) GL-3. Ashoka Estate-24, New Delhi Barakhamba Road, Connaught Place New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACS6857L ITA No. 543, 544/Del/2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 ACIT Vs Sara Services & Engineers Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara India Pvt…

Sara Services & Engineers Pvt. Ltd., New Delhi vs. ACIT, New Delhi

In the results appeal of the assessee is partly disallowed on ground no

ITA 406/DEL/2010[2002-03]Status: DisposedITAT Delhi18 Jan 2016AY 2002-03

Bench: Sri C.M.Garg, Jm & Sri L.P.Sahu, Am Ita No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04

For Appellant: Sri O.P. Sapra, Sri Sandeep Sapara, Adv. , ShriFor Respondent: Sri Sujit kumar, Sr. DR & Smt. Sunita Kejriwal, CIT,DR
Section 143Section 143(1)Section 147Section 148Section 80H

…IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G ’, NEW DELHI Before Sri C.M.Garg, JM And Sri L.P.Sahu, AM ITA No. 406,407/Del./2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 Sara Services & Engineers Vs ACIT Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara C.R.Building. I.P.Estate India Pvt. Ltd. ) GL-3. Ashoka Estate-24, New Delhi Barakhamba Road, Connaught Place New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACS6857L ITA No. 543, 544/Del/2010 Asstt. Year : 2002-03 Asstt. Year : 2003-04 ACIT Vs Sara Services & Engineers Pvt. Ltd. Circle-7(1), Room No. 323 (Now Known as NOV Sara India Pvt…

Tac Resources (I) Pvt Ltd., Chennai vs. ACIT, Chennai

In the result, the appeals of the assessee in ITA Nos

ITA 978/CHNY/2014[2007-08]Status: DisposedITAT Chennai11 Dec 2015AY 2007-08

Bench: Shri Chandra Poojari & Shri G. Pavan Kumarआयकर अपील सं./I.T.A.Nos. 977 & 978/Mds/2014 "नधा"रण वष" /Assessment Years : 2006-07 & 2007-08. Tax Resources (I) Pvt. Ltd, Vs. The Assistant Commissioner No.224 & 232 Okkiam Of Income Tax, Thoraipakkam, Company Circle Iii(1) Chennai 600 096. Chennai.

For Appellant: Shri. R. Vijayaraghavan, AdvocateFor Respondent: Dr. B. Nischal, IRS, JCIT
Section 143(1)Section 143(3)Section 148

…m students and also by Ministry of Labour, Government of India. We rely on the principles for test of scope of business expenditure wholly and exclusively for the purpose of business as held in the Supreme Court case ‘’Eastern Investments Ltd vs. CIT (1951) 20 ITR 1 (SC)’’, where the following principles were laid down:- (a) ‘’Though the question must be decided on the facts of each case, the final conclusion is one of law: ITA Nos.977 & 978/Mds/2014. :- 9 -: (b) It is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned; (c) It is enough to show that the mo…

Tac Resources (I) Pvt Ltd., Chennai vs. ACIT, Chennai

In the result, the appeals of the assessee in ITA Nos

ITA 977/CHNY/2014[2006-07]Status: DisposedITAT Chennai11 Dec 2015AY 2006-07

Bench: Shri Chandra Poojari & Shri G. Pavan Kumarआयकर अपील सं./I.T.A.Nos. 977 & 978/Mds/2014 "नधा"रण वष" /Assessment Years : 2006-07 & 2007-08. Tax Resources (I) Pvt. Ltd, Vs. The Assistant Commissioner No.224 & 232 Okkiam Of Income Tax, Thoraipakkam, Company Circle Iii(1) Chennai 600 096. Chennai.

For Appellant: Shri. R. Vijayaraghavan, AdvocateFor Respondent: Dr. B. Nischal, IRS, JCIT
Section 143(1)Section 143(3)Section 148

…m students and also by Ministry of Labour, Government of India. We rely on the principles for test of scope of business expenditure wholly and exclusively for the purpose of business as held in the Supreme Court case ‘’Eastern Investments Ltd vs. CIT (1951) 20 ITR 1 (SC)’’, where the following principles were laid down:- (a) ‘’Though the question must be decided on the facts of each case, the final conclusion is one of law: ITA Nos.977 & 978/Mds/2014. :- 9 -: (b) It is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned; (c) It is enough to show that the mo…

M/S Herbalife International India Pvt. Ltd., Bangalore vs. ACIT

In the result, IT(TP)A No

ITA 184/BANG/2013[2008-09]Status: DisposedITAT Bangalore09 Oct 2015AY 2008-09

Bench: Shri Vijay Pal Rao & Shri Jason P Boaz

For Appellant: Shri Rajan Vora, CAFor Respondent: Shri Anurag Sahay, CIT(DR)
Section 143(3)Section 32(1)(ii)Section 40A(2)Section 92C

…ognized in India’s tax jurisprudence. It is well settled that the revenue cannot dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur (Eastern Investment Ltd 20 ITR 1 (SC), Walchand & Co 65 ITR 381 (SC) followed). Even Rule 10B(1)(a) does not authorise disallowance of expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same. 13. In light of the aforesaid decisions, it was submitted that the approach of the TPO is not proper and the same should be held as not valid…

Herbalife International India Private Limited, Bangalore vs. ACIT, Bangalore

In the result, IT(TP)A No

ITA 1679/BANG/2012[2008-09]Status: DisposedITAT Bangalore09 Oct 2015AY 2008-09

Bench: Shri Vijay Pal Rao & Shri Jason P Boaz

For Appellant: Shri Rajan Vora, CAFor Respondent: Shri Anurag Sahay, CIT(DR)
Section 143(3)Section 32(1)(ii)Section 40A(2)Section 92C

…ognized in India’s tax jurisprudence. It is well settled that the revenue cannot dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur (Eastern Investment Ltd 20 ITR 1 (SC), Walchand & Co 65 ITR 381 (SC) followed). Even Rule 10B(1)(a) does not authorise disallowance of expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same. 13. In light of the aforesaid decisions, it was submitted that the approach of the TPO is not proper and the same should be held as not valid…

South Ltd) vs. Commissioner of Income Tax

The appeals are allowed but in the circumstances, with no

ITA/336/2014HC Delhi21 Sept 2015
Section 260A

…e. 11. Before discussing the facts of the case, it may be noticed that the provision in the Income Act, 1922 („1922 Act‟), corresponding to Section 57 (iii) of the Act, was Section 12. In Eastern Investments Limited v. Commissioner of Income-Tax (1951) 20 ITR 1 the Appellant was an investment company originally formed for acquiring, holding and otherwise dealing with shares and government securities which belonged to one Lord Cable. The share capital of the company was Rs. 250 lakhs, and the majority of its shares, including 50,000 ordinary shares of the face value of Rs. 50 lakhs were held by Lord…

South Ltd) vs. Commissioner of Income Tax

The appeals are allowed but in the circumstances, with no

ITA/334/2014HC Delhi21 Sept 2015
Section 260A

…e. 11. Before discussing the facts of the case, it may be noticed that the provision in the Income Act, 1922 („1922 Act‟), corresponding to Section 57 (iii) of the Act, was Section 12. In Eastern Investments Limited v. Commissioner of Income-Tax (1951) 20 ITR 1 the Appellant was an investment company originally formed for acquiring, holding and otherwise dealing with shares and government securities which belonged to one Lord Cable. The share capital of the company was Rs. 250 lakhs, and the majority of its shares, including 50,000 ordinary shares of the face value of Rs. 50 lakhs were held by Lord…

Commissioner of Income Tax vs. Discovery Communication India

The appeals are disposed of

ITA/1297/2010HC Delhi24 Nov 2014
Section 260A

…that advertisement expenditure fails to meet the requirement of “wholly and exclusively”. Law in this regard is well settled. Relevant would be to refer to authoritative pronouncement of the Supreme Court in CIT v. Chandulal Keshavlal& Co., Petlad, [1960] 38 ITR 601, observing: - “In deciding whether a payment of money is a deductible expenditure one has to take into consideration questions of commercial expediency and the principles of ordinary commercial trading. If the payment or expenditure is incurred for the purpose of the trade of the assessee it does not matter that the payment may inure to the…

Commissioner of Income Tax vs. Samsung India Electronics Ltd

In the result, all the three appeals filed by the revenue are dismissed with

ITA/98/2010HC Delhi03 Sept 2012
Section 260ASection 37(2)

…o the whole and exclusive nature of the purpose. This principle was applied in India by the Supreme Court in Eastern Investment Ltd. Vs. CIT (1951) 20 ITR 1, CIT Vs. Royal Calcutta Turf Club (1961) 41 ITR 414 and CIT Vs. Chandulal Keshavlal and Co. (1960) 38 ITR 601. Having regard to the legal position adumbrated in the aforesaid cases we do not 2012:DHC:5445-DB ITA Nos.98, 113 & 143 of 2010 Page 12 of 12 find any error of law in the approach adopted by the Tribunal. Accordingly, the question o…

CIT vs. Ekl Appliances Ltd

ITA - 1068 / 2011HC Delhi29 Mar 2012
Section 260ASection 92C

…the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur. We may refer to a few of these authorities to elucidate the point. In Eastern Investment Ltd. v. CIT, (1951) 20 ITR 1, it was held by the Supreme Court that “there are usually many ways in which a given thing can be brought about in business circles but it is not for the Court to decide which of them should have been employed when the Court is deciding a question under Section 12(2) of the Income Tax Act”. It was further held in this case that “it is not nece…

Commissioner of Income Tax vs. M/S Oracle India Pvt. Ltd

ITA/1242/2010HC Delhi30 Mar 2011

Bench: HON'BLE MR. JUSTICE A.K.SIKRI,HON'BLE MR. JUSTICE M.L. MEHTA

Section 260ASection 37(1)Section 92

…cilitate the carrying on the business, may yet be expended wholly and exclusively for the purposes of the trade.” The above test was quoted with approval and applied by the Supreme Court in the case of Eastern Investments Ltd. Vs. Commissioner of Income Tax, 20 ITR 1. It is well-settled that it is not open to the Department to adopt a subjective standard of reasonableness and disallow a part of business expenditure as being unreasonably large, or decide what type of expenditure the assessee should incur and in what circumstances. This was so held by the Supreme Court in the case of Commissioner of Income Tax Vs…