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“commercial expediency”

Business ExpensesSection 37Section 371,685 judgments

The decision most relied on for commercial expediency is S.A. Builders Ltd. v. CIT (288 ITR 1), cited in 1,484 judgments on BharatTax.

Leading authorities on commercial expediency

S.A. Builders Ltd. v. CIT
288 ITR 1 · 2007 · Supreme Court
1,484
citing judgments

Interest paid on borrowed funds cannot be disallowed merely because the assessee made interest-free advances, provided those advances were made for business purposes and commercial expediency. The Revenue cannot dictate a businessman's commercial decisions, but the assessee bears the onus to prove the business expediency.

Empire Jute Co. Ltd. v. CIT
124 ITR 1 · 1980 · Supreme Court
622
citing judgments

Expenditure is classified as revenue or capital based on its practical business effect, necessity, or expediency, rather than solely on the juristic classification of rights; an enduring benefit does not automatically make an expenditure capital if it facilitates trading operations or business efficiency.

CIT v. Reliance Industries Ltd.
410 ITR 466 · 2019 · Supreme Court
501
citing judgments

When mixed funds are available, interest-free advances are presumed to be made from the assessee's own interest-free funds, preventing disallowance of interest expenditure under section 36(1)(iii). This principle also applies to section 14A disallowance, where interest expenditure is not disallowed if surplus funds are available and no direct nexus is established with borrowed funds for investments earning exempt income.

CIT v. Dalmia Cement (Bharat) Ltd.
254 ITR 377 · 2002 · High Court
417
citing judgments

When there is a nexus between an expenditure and the purpose of business, incurred on grounds of commercial expediency, the Revenue cannot question its reasonableness or assume the role of the businessman to compel profit maximization. This principle applies even if the business is not that of the assessee itself.

Hero Cycles Pvt. Ltd. v. CIT
379 ITR 347 · 2015 · Supreme Court
361
citing judgments

The Revenue cannot substitute its judgment for that of a businessman regarding the necessity or reasonableness of an expenditure. If an expense is incurred wholly and exclusively for business purposes, it is deductible, and the Revenue cannot question its commercial expediency.

CIT v. Abhishek Industries Ltd.
286 ITR 1 · 2006 · High Court
359
citing judgments

For interest on borrowed capital to be deductible under Section 36(1)(iii), there must be a nexus between the use of the borrowed funds and the purpose of the business. This decision has been overruled by the Supreme Court in Munjal Sales Corporation v. CIT (2008).

Eastern Investments Ltd. v. CIT
38 ITR 601 · 1960 · Supreme Court
346
citing judgments

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.

Sassoon J. David & Co. Pvt. Ltd. v. CIT
118 ITR 261 · 1979 · Supreme Court
323
citing judgments

An expense incurred by an assessee for its own business, such as advertising, marketing, and promotional (AMP) expenses, cannot be disallowed merely because it incidentally or indirectly benefits the assessee's sister concerns or associated enterprises.

Judgments citing commercial expediency

Ecoenergy Insights Ltd ( Formerly Known As Chubb Alba Control Systems P.Ltd), New Delhi vs. DCIT, Circle-4(2), New Delhi

In the result, the appeal filed by the assessee is partly allowed as indicated above

ITA 2321/DEL/2022[2018-19]Status: DisposedITAT Delhi10 Nov 2025AY 2018-19

Bench: Shri S. Rifaur Rahman & Shri Anubhav Sharmaecoenergy Insights Ltd., Vs. Dcit, (Formerly Known As Chubb Alba Control Circle 4 (2), Systems P. Ltd.), New Delhi. Ground Floor, 18, Netaji Subhash Marg, Daryaganj, New Delhi – 110 002. (Pan :Aaaca0031C) (Appellant) (Respondent) Assessee By : Shri Nageshwar Rao, Advocate Shri Parth, Advocate Shri Pratik Rath, Advocate Revenue By : Shri S.K. Jadhav, Cit Dr Date Of Hearing : 12.08.2025 Date Of Order : 10.11.2025 O R D E R Per S. Rifaur Rahman: 1. This Appeal Preferred By The Assessees Is Directed Against The Assessment Order Dated 25.07.2022Passed By The Assessment Unit, Income Tax Department Under Section 147 Read With Section 144C(13) R.W.S. 144B Of The Income-Tax Act, 1961 (For Short ‘The Act”) For Ay 2018-19 Pursuant To The Directions Of The Dispute Resolution Panel U/S 144C(5) Of The Act.

For Appellant: Shri Nageshwar Rao, AdvocateFor Respondent: Shri S.K. Jadhav, CIT DR
Section 143(2)Section 144C(13)Section 144C(5)Section 147Section 92C

business. 9. That on the facts and circumstances of the case and in law, the Ld. AO/TPO/DRP have erred in questioning the commercial expediency of the Appellant and questioning whether the same have resulted in any tangible benefit received. 10. Without prejudice to the same, on the facts and circumstances

M/S. Thiruvalluvar Textiles Pvt. Ltd., Rasipuram vs. ACIT, Central Circle-1(1), Chennai

In the result, the appeal of the assessee is allowed for A

ITA 1737/CHNY/2025[2017-18]Status: DisposedITAT Chennai04 Nov 2025AY 2017-18

Bench: Shri George George K & Shri S.R.Raghunatha

For Appellant: Shri. Y.Sridhar, FCAFor Respondent: Shri. Shiva Srinivas, CIT
Section 11

considered as interest-free funds available with the assessee company. Further, the ld.AR submitted that the assessee had lent/acquired M/s.TNMPL in the interest of ‘commercial expediency’. The assessee company had advanced monies to its subsidiary company to expand its business interest and are solely for the purpose of business. Moreover ... building. In support of the same the ld.AR drew our attention to the copy of the Sanction Letter. Hence the ld.AR argued that the ‘commercial expediency’ is proved beyond doubt in the present case. 15. The expression “commercial expediency” is an expression of wide import and includes such expenditure

M/S. Thiruvalluvar Textiles Pvt. Ltd., Rasipuram vs. ACIT, Central Circle-1(1), Chennai

In the result, the appeal of the assessee is allowed for A

ITA 1736/CHNY/2025[2016-17]Status: DisposedITAT Chennai04 Nov 2025AY 2016-17

Bench: Shri George George K & Shri S.R.Raghunatha

For Appellant: Shri. Y.Sridhar, FCAFor Respondent: Shri. Shiva Srinivas, CIT
Section 11

considered as interest-free funds available with the assessee company. Further, the ld.AR submitted that the assessee had lent/acquired M/s.TNMPL in the interest of ‘commercial expediency’. The assessee company had advanced monies to its subsidiary company to expand its business interest and are solely for the purpose of business. Moreover ... building. In support of the same the ld.AR drew our attention to the copy of the Sanction Letter. Hence the ld.AR argued that the ‘commercial expediency’ is proved beyond doubt in the present case. 15. The expression “commercial expediency” is an expression of wide import and includes such expenditure

M/S.Thiruvalluvar Textiles Pvt. Ltd., Rasipuram vs. ACIT, Central Circle-1(1), Chennai

In the result, the appeal of the assessee is allowed for A

ITA 1735/CHNY/2025[2014-15]Status: DisposedITAT Chennai04 Nov 2025AY 2014-15

Bench: Shri George George K & Shri S.R.Raghunatha

For Appellant: Shri. Y.Sridhar, FCAFor Respondent: Shri. Shiva Srinivas, CIT
Section 11

considered as interest-free funds available with the assessee company. Further, the ld.AR submitted that the assessee had lent/acquired M/s.TNMPL in the interest of ‘commercial expediency’. The assessee company had advanced monies to its subsidiary company to expand its business interest and are solely for the purpose of business. Moreover ... building. In support of the same the ld.AR drew our attention to the copy of the Sanction Letter. Hence the ld.AR argued that the ‘commercial expediency’ is proved beyond doubt in the present case. 15. The expression “commercial expediency” is an expression of wide import and includes such expenditure

M/S. Thiruvalluvar Textiles Pvt. Ltd., Rasipuram vs. ACIT, Central Circle-1(1), Chennai

In the result, the appeal of the assessee is allowed for A

ITA 1734/CHNY/2025[2013-14]Status: DisposedITAT Chennai04 Nov 2025AY 2013-14

Bench: Shri George George K & Shri S.R.Raghunatha

For Appellant: Shri. Y.Sridhar, FCAFor Respondent: Shri. Shiva Srinivas, CIT
Section 11

considered as interest-free funds available with the assessee company. Further, the ld.AR submitted that the assessee had lent/acquired M/s.TNMPL in the interest of ‘commercial expediency’. The assessee company had advanced monies to its subsidiary company to expand its business interest and are solely for the purpose of business. Moreover ... building. In support of the same the ld.AR drew our attention to the copy of the Sanction Letter. Hence the ld.AR argued that the ‘commercial expediency’ is proved beyond doubt in the present case. 15. The expression “commercial expediency” is an expression of wide import and includes such expenditure

Sh. Krishna Kumar Poddar, Jaipur vs. ACIT, Circle-2, Jaipur

In the result, appeal of the assessee is allowed

ITA 743/JPR/2025[2017-18]Status: DisposedITAT Jaipur03 Nov 2025AY 2017-18

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)

For Appellant: Shri P. C. Parwal, C.AFor Respondent: Shri
Section 250Section 270A

made addition for the same. 4. The Ld. CIT(A) NFAC observed that assessee failed to prove commercial expediency for the loan taken and the interest paid thereon. Interest payment had not been made towards earning of interest income and assessee failed to prove the nexus regarding interest payment

Dy Commissioner of Income Tax, Noida vs. Bright Buildtech Pvt. Ltd, Delhi

In the result, appeal of the Revenue is dismissed

ITA 595/DEL/2025[2018]Status: DisposedITAT Delhi31 Oct 2025

Bench: Shri Anubhav Sharma & Shri Manish Agarwal[Assessment Year : 2018-19] Dcit Vs Bright Buildtech Pvt.Ltd. Central Circle-1 Flat No.14, Ground Floor A.R.T.O Complex Dda Mig, Suraj Sector-33, Noida Apartment, Pul Pehlad Pur New Delhi-110044 Pan-Aaccb7981J Appellant Respondent Revenue By Shri Rajesh Chandra, Cit Dr Assessee By Shri Rohit Kapoor, Adv. & Shri Veersain Aggarwal, Ca Date Of Hearing 14.08.2025 Date Of Pronouncement 31.10.2025

Section 142(1)Section 143(2)Section 143(3)Section 250Section 36(1)(iii)

given proper opportunity during the course of assessment proceedings failed to prove that the said loans were given out of interest free funds. The commercial expediency in respect of these loan has also not been proved by the assessee; hence, the AO has rightly disallowed the interest ... assessee has failed to prove the nexus between the interest free funds and the interest free advances given and further failed to establish the commercial expediency in providing such loans therefore, Ld. CIT DR vehemently supports the order of AO and requested to confirm the order

Bundy India Limited, Vadodara vs. The Dy. CIT., Circle-1(1), Baroda

In the result, Ground Number 6 of the assessee’s appeal is allowed for statistical purposes

ITA 1403/AHD/2016[2009-10]Status: DisposedITAT Ahmedabad30 Oct 2025AY 2009-10

Bench: Annapurna Gupta & Shri Siddhartha Nautiyalआयकर अपील सं /Ita No.1403/Ahd/2016 िनधा"रण वष" /Assessment Year : 2009-10 Bundy India Limited The Dy.Cit बनाम/ Plot No.2, Circle-1(1) V/S. Gidc Industrial Estate, Baroda Makarpura Vadodaria - 390 010 "थायी लेखा सं./Pan: Aaacb 3039 M (अपीलाथ"/ Appellant) ("" यथ"/ Respondent) Assessee By : Shri S.N. Soparkar, Sr. Advocate Revenue By : Shree Veerbadram Vislavath, Sr.Dr सुनवाई की तारीख/Date Of Hearing : 31/07/2025 घोषणा की तारीख /Date Of Pronouncement: 30/10/2025 आदेश/O R D E R Per Siddhartha Nautiyal, Jm:

For Appellant: Shri S.N. Soparkar, Sr. AdvocateFor Respondent: Shree Veerbadram Vislavath, Sr.DR
Section 133(6)Section 250Section 92CSection 92C(1)Section 92C(3)

precedents such as Dresser-Rand India Pvt. Ltd. (ITAT Mumbai) and CIT v. Vishakhapatnam Port Trust (144 ITR 146), on the ground that the commercial expediency of such expenditure could not be questioned by the tax authorities. However, the CIT(A) upheld the TPO’s findings, observing that a similar

Sms Smelters Limited, Naharlagun vs. Assistant Commissioner of Income Tax, Circle-3, Guwahati

Appeal is partly allowed for statistical purposes

ITA 100/GTY/2023[2017-18]Status: DisposedITAT Guwahati28 Oct 2025AY 2017-18

Bench: SHRI MANOMOHAN DAS, JUDICIAL MEMBER SHRI SANJAY AWASTHI (Accountant Member)

Section 2(24)(x)Section 250Section 36

other funds under Short Term Loan and Advances. It is a matter of record that the Appellant has not adduced any evidence to establish "commercial expediency" of the purported Non-Current Investments or Short-Term Loan and Advances. Further, the Appellant has not brought on record any evidence to establish ... trite that an AO cannot sit in the arm chair of an assessee. However, even the said settled proposition is subject to proving the commercial expediency. In the absence of establishing the basic foundation, ie "the commercial expediency", the further contentions are merely akin to beating the bush Even presuming

Moorgate Industries India Pvt Ltd, Mumbai vs. DCIT Central Circle 3(3), Mumbai

In the result the appeal filed by the assessee stands partly allowed

ITA 4282/MUM/2025[2011-12]Status: DisposedITAT Mumbai28 Oct 2025AY 2011-12

Bench: Smt. Beena Pillai () & Shri Arun Khodpia ()

Section 14ASection 43B

purposes of business. He submitted that no disallowance can be made against such a trading activity which was purely on account of commercial expediency. 4.1 The Ld.AR further submitted that in any event the investments are out of the reserve and surplus funds already available with the assessee. He submitted

Fullerton Financial Holdings Pte. Ltd., Singapore vs. The Assistant Commissioner of Income-Tax - (International Taxation), Circle 2(3)(1) - Mumbai, Mumbai

ITA 1137/MUM/2025[2022-23]Status: DisposedITAT Mumbai28 Oct 2025AY 2022-23

Bench: Smt. Beena Pillai () & Smt. Renu Jauhri ()

Section 143(2)Section 143(3)Section 144CSection 144C(1)Section 144C(13)Section 144C(5)Section 153

March 2024. It is therefore factually erroneous to assume that the Singapore IRAS had not verified the content, allocation, basis of allocation, questioned the commercial expediency. 2.7. The Ld.AO after considering the submissions rejected the claim of non-taxability of capital gains by invoking Article 24A(3) of the India

New India Exports Privat Limited, Mumbai vs. ITO Ward 7(1)(1), Mumbai

In the result, the appeal for Assessment Year 2016

ITA 2656/MUM/2025[2020-21]Status: DisposedITAT Mumbai27 Oct 2025AY 2020-21

Bench: Shri Om Prakash Kant () & Shri Narender Kumar Choudhry ()

For Appellant: Mr. J.P. BairagraFor Respondent: 03/09/2025

India Furnitures Café LLP, without deriving any commensurate business , without deriving any commensurate business , without deriving any commensurate business benefit. The plea of commercial expediency advanced by the nefit. The plea of commercial expediency advanced by the nefit. The plea of commercial expediency advanced by the assessee was found unsubstantiated ... assessee further contended that the above In this regard, the assessee further contended that the above investment was done as a part of commercial expediency. investment was done as a part of commercial expediency. investment was done as a part of commercial expediency. However, during the current AY, the assessee

New India Exports Private Limited, Mumbai vs. Income Tax Officer Ward 7(1)(1), Mumbai

In the result, the appeal for Assessment Year 2016

ITA 2655/MUM/2025[2016-17]Status: DisposedITAT Mumbai27 Oct 2025AY 2016-17

Bench: Shri Om Prakash Kant () & Shri Narender Kumar Choudhry ()

For Appellant: Mr. J.P. BairagraFor Respondent: 03/09/2025

India Furnitures Café LLP, without deriving any commensurate business , without deriving any commensurate business , without deriving any commensurate business benefit. The plea of commercial expediency advanced by the nefit. The plea of commercial expediency advanced by the nefit. The plea of commercial expediency advanced by the assessee was found unsubstantiated ... assessee further contended that the above In this regard, the assessee further contended that the above investment was done as a part of commercial expediency. investment was done as a part of commercial expediency. investment was done as a part of commercial expediency. However, during the current AY, the assessee

Goodone Traders Private Limited, Delhi vs. CIT(A), Delhi

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 5591/DEL/2024[2014-15]Status: DisposedITAT Delhi27 Oct 2025AY 2014-15

Bench: Shri S Rifaur Rahman & Shri Vimal Kumarassessment Year: 2014-15 Goodone Traders Private Vs. Commissioner Of Income Tax Limited, 886A/47 (Appeals), Ward No. 6, Mehrauli Delhi Delhi- 1100 30 Pan: Aaacy2998Q (Appellant) (Respondent)

For Appellant: Ms. Meenal Goyal, CA, Ms. VidhiFor Respondent: Shri Sanjeev Kaushal, CIT (DR)
Section 143(1)Section 143(2)Section 143(3)Section 147Section 148Section 250Section 68

letter of credit (L/C) is not a sine-qua-non for an export transaction and that the AO has erred in questioning the commercial expediency of the impugned transaction contrary to settled jurisprudence. 9. That on the facts and circumstances of the case

Deputy Commissioner of Income Tax, Circle-1(1), New Delhi, Delhi vs. Shri Lakshmi Metal Udyog Limited, Delhi

In the result, the appeal of the Revenue is dismissed

ITA 4235/DEL/2024[2017-18]Status: DisposedITAT Delhi27 Oct 2025AY 2017-18

Bench: Sh.Challa Nagendra Prasad & Sh.Brajesh Kumar Singhassessment Year: 2017-18 Dcit Vs. Sh. Lakshmi Metal Udyog Circle 1 (1), Room No. 404, Limited, 37, Hargovind C. R. Building, I.P. Estate, Enclave, Vikas Marg, New Delhi-110002 Delhi -110092 Pan No. Aahcs9174M (Appellant) (Respondent)

Section 143(3)

concrete evidence by the AO it was held by him that it seems it were incurred solely for business purpose and incurred for commercial expediency for assessee’s business and also incurred to reward its customers and dealers to motivate them to further work for augment of the resources ... which the said foreign travel expenses were incurred deleted the said addition by holding that the same was incurred for business purpose and for commercial expediency. Further, we also note that the similar deletion of disallowance of foreign travel expenses under the dealers scheme was upheld by the coordinate Bench

DCIT-2(2)(1), Mumbai vs. Jyoti Structures Limited, Mumbai

In the result, appeal of the revenue is dismissed

ITA 4825/MUM/2025[2007-08]Status: DisposedITAT Mumbai24 Oct 2025AY 2007-08

Bench: Shri Saktijit Dey, Hon’Ble & Shri Narendra Kumar Billaiya, Hon’Ble

For Appellant: Shri Madhur Agrawal, A/RFor Respondent: Shri Vivek Perampurna, CIT D/R
Section 153A

availability of interest-free funds (as laid down in Reliance Industries Ltd.) to delete disallowance of notional interest, when the assessee failed to establish commercial expediency at the time of giving the advance?" 6. The appellant craves the leave to add, amend, alter and/ or delete any of the grounds

Kausalya Agro Farms Amd Developers Private Limited, Hyderabad vs. ITO., Ward-2(1), Hyderabad

In the result, the appeal of the assessee is allowed for statistical purposes, in terms of our above findings

ITA 804/HYD/2025[2016-17]Status: DisposedITAT Hyderabad17 Oct 2025AY 2016-17

Bench: Shri Vijay Pal Rao & Shri Madhusudan Sawdia

For Appellant: Shri S. Rama Rao, AdvocateFor Respondent: Dr. Sachin Kumar, Sr. DR
Section 147Section 148Section 251(1)(a)Section 36(1)(iii)

676/Hyd/2020, dated 04.09.2024, wherein the Tribunal had deleted the disallowance made under section 36(1)(iii) of the Act on the ground of commercial expediency. It was submitted that since the facts for the present year are identical, the same ITA No.804/Hyd/2025 7 finding of the Tribunal should apply ... other group companies can be said to be in the normal course of the business of the assessee and thus, there is a commercial expediency. Therefore, we are of the considered view that the AO erred in ITA No.804/Hyd/2025 13 disallowing finance charges being interest paid on customers’ advances without

Michael Page International Recruitment Pvt Ltd, Mumbai vs. DCIT Circle 14(1)(1), Mumbai

ITA 6748/MUM/2024[2021-22]Status: DisposedITAT Mumbai16 Oct 2025AY 2021-22
Section 143(3)Section 144BSection 144C(13)Section 144C(5)Section 153Section 37Section 41Section 92D

documentation provided by the Appellant to substantiate need for the services received by the Appellant from its AEs and benefits arising therefrom; • Questioning the commercial expediency in availing the services from the AEs and corresponding payment for IGS, thereby exceeding the jurisdiction; • Rejecting the allocation methodology of the Appellant

Govindam Brj Infra Projects Private Limited, Jaipur vs. ACIT/DCIT Cir-6, Jpr, Jaipur

The appeals of the assessee are allowed

ITA 1115/JPR/2025[2018-19]Status: DisposedITAT Jaipur15 Oct 2025AY 2018-19
For Appellant: Shri Deepak Somani, C.AFor Respondent: Shri Gaurav Awasthi, JCIT
Section 143(3)Section 145(3)Section 234ASection 234BSection 250Section 270A(1)Section 271Section 44A

Court in the case of CIT (Bom.) vs. Walchand & Company Pvt. Ltd. in 65 ITR 381 (SC) held that " in applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively for business, the expenditure has to be adjudged from the point of view

Govindam Brj Infra Projects Private Limited, Jaipur vs. ACIT/DCIT Cir-6, Jpr, Jaipur

The appeals of the assessee are allowed

ITA 1114/JPR/2025[2017-18]Status: DisposedITAT Jaipur15 Oct 2025AY 2017-18

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI GAGAN GOYAL (Accountant Member)

For Appellant: Shri Deepak Somani, C.AFor Respondent: Shri Gaurav Awasthi, JCIT
Section 143(3)Section 145(3)Section 234ASection 234BSection 250Section 270A(1)Section 271Section 44A

Court in the case of CIT (Bom.) vs. Walchand & Company Pvt. Ltd. in 65 ITR 381 (SC) held that “ in applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively for business, the expenditure has to be adjudged from the point of view