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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

ITO, Ward- 17(4), New Delhi vs. Navya Securities Pvt. Ltd., New Delhi

ITA 5565/DEL/2017[2013-14]Status: DisposedITAT Delhi09 Dec 2024AY 2013-14

Bench: Ms.Madhumita Roy & Smt. Renu Jauhriincome Tax Officer Vs. M/S Navya Securities Pvt. Ward-17(4) Ltd., B-2, Jangpura Room No. 225D, Extension, Cr Building, I.P. Estate New Delhi – 110014 New Delhi -2 "थायीलेखासं./जीआइआरसं./Pan/Gir No: Aaacn3106H Appellant .. Respondent

For Appellant: Sh. Ruchesh Sinha, AdvFor Respondent: Sh. Amit Katosh, Sr. DR
Section 143(3)Section 71(2)

transaction. The assessing officer has failed to appreciate that the investment in the sister concerns and amongst the holding and subsidiary companies are normal commercial expediency transactions and in the present case as well the investment was made by the assessee company in M/s KR Chawla Consulting

DCIT Pondicherry Circle, Pondicherry vs. Ravikumar Distilleries Ltd., Pondicherry

Accordingly. The ground stand partly allowed

ITA 1395/CHNY/2018[2012-13]Status: DisposedITAT Chennai03 Dec 2024AY 2012-13

Bench: Hon’Ble Shri Manoj Kumar Aggarwal, Am & Hon’Ble Shri Manu Kumar Giri, Jm 1.आयकरअपील सं./ Ita No.974/Chny/2018 (िनधा)रणवष) / Assessment Year: 2012-13) M/S. Ravikumar Distilleries Limited Dcit बनाम/ #17, Kamaraj Salai, Pondicherry Circle, Vs. Pondicherry-605 011. Puducherry-605 001. "थायीलेखासं./जीआइआरसं./Pan/Gir No.Aabcr-4195-D (अपीलाथ"/Appellant) : (" थ" / Respondent) & 2.आयकरअपील सं./ Ita No.1395/Chny/2018 (िनधा)रणवष) / Assessment Year: 2012-13) Dcit M/S. Ravikumar Distilleries Limited बनाम Pondicherry Circle, # C-9 & C-10, Industrial Estate, / Vs. Puducherry-605 001. Thattanchavady, Pondicherry-605 009. "थायीलेखासं./जीआइआरसं./Pan/Gir No.Aabcr-4195-D (अपीलाथ"/Appellant) : (" थ" / Respondent) अपीलाथ"कीओरसे/ Assessee By : Shri N. Arjun Raj (Advocate) - Ld.Ar " थ"कीओरसे/Revenue By : Shri A.Sasikumar (Cit) - Ld. Sr. Dr सुनवाईकीतारीख/Date Of Hearing : 21-11-2024 घोषणाकीतारीख /Date Of Pronouncement : 03-12-2024 आदेश / O R D E R Manoj Kumar Aggarwal ()

For Appellant: Shri N. Arjun Raj (Advocate) - ld.ARFor Respondent: Shri A.Sasikumar (CIT) - Ld. Sr. DR
Section 143(3)Section 14ASection 194JSection 36(1)(iii)Section 40Section 69

distillery plant which is in the same line of existing business of the assessee. In such a case, the test of commercial expediency would be satisfied and therefore, no such interest disallowance could have been made considering the decision of Hon’ble Apex Court in the case of S.A. Builders ... Limited vs. CIT (2007) 288 ITR 1 holding that once the commercial expediency is established, the expenditure would be allowable to the assessee. Even otherwise, the assessee had sufficient interest free funds to make the advances. Therefore, the ratio of decision of Hon’ble Supreme Court in the case

Simoco Systems and Infrastructure Solutions Limited, Kolkata vs. ITO Ward 2 (1), Kolkata

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

ITA 123/KOL/2024[2018-19]Status: DisposedITAT Kolkata29 Nov 2024AY 2018-19

Bench: Shri Sonjoy Sarma & Shri Rakesh Mishraassessment Year: 2018-19

For Appellant: Indranil Banerjee, ARFor Respondent: Ankur Goyal, JCIT, Sr. DR
Section 115JSection 133(6)Section 143(3)Section 144BSection 250

sister concern (a subsidiary) as interest-free loan. The test in such a case was really whether this was done as a measure of commercial expediency. [Para 21] The decisions relating to section 37 will also be applicable to section 36(1)(iii) be- cause in section 37 also ... show that the money is expended, not of necessity and with a view to direct and immediate benefit, but voluntarily and on grounds of commercial expediency and in order to indirectly facilitate the carrying on of the business. [Para 23] The High Court as well as the Tribunal and other

Otis Elevator Company (India) Limited, Mumbai vs. DCIT, 13(1)(2), Mumbai

ITA 3337/MUM/2024[2020-21]Status: DisposedITAT Mumbai29 Nov 2024AY 2020-21

Bench: Shri Narendra Kumar Billaiya, Hon'Ble & Shri Sunil Kumar Singh, Hon'Bleι.Τ.Α. No. 3337/Mum/2024

For Appellant: Shri Rajan Vora & Nikhil Tiwari, A/RsFor Respondent: Shri Asif Karmali, Sr. D/R
Section 143(3)Section 144C(13)Section 234ASection 234CSection 234FSection 270A(1)Section 37(1)Section 92CSection 92C(3)

outlining the total costs incurred by Otis Group in rendering these services to all the group entities based on scientific allocation keys; Disregarding the commercial expediency of the international transaction: 7. erred in not considering the commercial expediency of the international transaction of payment of management fees and without appreciating ... supported by identifiable, reasonable benefit. Referring to the guidelines of OECD, the TPO was of the opinion that in the case of assessee, commercial expediency of the international transactions relating to services are not being examined instead an exercise is being undertaken to check whether the assessee passes need benefit

Avtec Ltd., New Delhi vs. DCIT (Ltu), Circle-1, New Delhi

In the result, the appeal of the assessee is allowed

ITA 7366/DEL/2019[2016-17]Status: DisposedITAT Delhi29 Nov 2024AY 2016-17

Bench: Shri Vikas Awasthy & Shri Naveen Chandra

For Appellant: Shri Salil Kapoor, Sr. AdvFor Respondent: Shri Vipul Kashypa, Sr. DR
Section 10ASection 115JSection 234BSection 80I

products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.Builders, we direct the AO to delete this

Avtec Ltd., New Delhi vs. ACIT (Ltu), Circle-1, New Delhi

In the result, the appeal of the assessee is allowed

ITA 1008/DEL/2019[2012-13]Status: DisposedITAT Delhi29 Nov 2024AY 2012-13

Bench: Shri Vikas Awasthy & Shri Naveen Chandra

For Appellant: Shri Salil Kapoor, Sr. AdvFor Respondent: Shri Vipul Kashypa, Sr. DR
Section 10ASection 115JSection 234BSection 80I

products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.Builders, we direct the AO to delete this

Avtec Ltd., New Delhi vs. DCIT (Ltu), Circle-1, New Delhi

In the result, the appeal of the assessee is allowed

ITA 8081/DEL/2018[2013-14]Status: DisposedITAT Delhi29 Nov 2024AY 2013-14

Bench: Shri Vikas Awasthy & Shri Naveen Chandra

For Appellant: Shri Salil Kapoor, Sr. AdvFor Respondent: Shri Vipul Kashypa, Sr. DR
Section 10ASection 115JSection 234BSection 80I

products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.Builders, we direct the AO to delete this

Avtec Ltd., New Delhi vs. ACIT (Ltu), Circle-1, New Delhi

In the result, the appeal of the assessee is allowed

ITA 4716/DEL/2018[2015-16]Status: DisposedITAT Delhi29 Nov 2024AY 2015-16

Bench: Shri Vikas Awasthy & Shri Naveen Chandra

For Appellant: Shri Salil Kapoor, Sr. AdvFor Respondent: Shri Vipul Kashypa, Sr. DR
Section 10ASection 115JSection 234BSection 80I

products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.Builders, we direct the AO to delete this

Avtec Ltd., New Delhi vs. ACIT (Ltu), Circle-1, New Delhi

In the result, the appeal of the assessee is allowed

ITA 2893/DEL/2018[2014-15]Status: DisposedITAT Delhi29 Nov 2024AY 2014-15

Bench: Shri Vikas Awasthy & Shri Naveen Chandra

For Appellant: Shri Salil Kapoor, Sr. AdvFor Respondent: Shri Vipul Kashypa, Sr. DR
Section 10ASection 115JSection 234BSection 80I

products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.Builders, we direct the AO to delete this

M/S Iifcl Asset Management Company Ltd., New Delhi vs. DCIT, New Delhi

In the result we answer the question as framed in favour of the assessee and against the revenue

ITA 2333/DEL/2017[2013-14]Status: DisposedITAT Delhi29 Nov 2024AY 2013-14

Bench: Shri Mahavir Singh & Shri Naveen Chandra

For Appellant: Shri Saurav Rohtagi, CAFor Respondent: Shri Choudhary N.C. Roy, Sr. DR
Section 143(3)Section 3Section 71

assessee went in appeal before the ld. CIT(A). 7. The ld. CIT(A) held that surplus funds were put into FDR without any commercial expediency and thus the interest is not linked with business and has to be treated as income from other sources.The CIT(A), referring ... necessary to have net worth of Rs. 10 crore or more. Therefore, it is a case of commercial expediency for infusion of share capital of Rs. 12.50 crores. Therefore, the ld AR averred that the interest earned on FDR may be treated as ‘business income.’ 14. The ld. counsel

Avtec Ltd., New Delhi vs. DCIT (Ltu), New Delhi

In the result, the appeal of the assessee is allowed

ITA 6332/DEL/2016[2012-13]Status: DisposedITAT Delhi29 Nov 2024AY 2012-13

Bench: Shri Vikas Awasthy & Shri Naveen Chandra

For Appellant: Shri Salil Kapoor, Sr. AdvFor Respondent: Shri Vipul Kashypa, Sr. DR
Section 10ASection 115JSection 234BSection 80I

products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.Builders, we direct the AO to delete this

M/S. Avtec Ltd., New Delhi vs. DCIT (Ltu), New Delhi

In the result, the appeal of the assessee is allowed

ITA 1009/DEL/2015[2011-12]Status: DisposedITAT Delhi29 Nov 2024AY 2011-12

Bench: Shri Vikas Awasthy & Shri Naveen Chandra

For Appellant: Shri Salil Kapoor, Sr. AdvFor Respondent: Shri Vipul Kashypa, Sr. DR
Section 10ASection 115JSection 234BSection 80I

products of the JV and the subsidiary. This would, in our opinion, naturally advance the business interest of the assessee and there is commercial expediency in undertaking such travel. In view of this and following the decision of the Supreme Court in S.A.Builders, we direct the AO to delete this

Deputy Commissioner of Income Tax, Central Circle-3, Jaipur vs. Naresh Kumar Gupta, Sriganganagar

In the results the appeal of the revenue stands dismissed and the

ITA 458/JPR/2024[2014-15]Status: DisposedITAT Jaipur28 Nov 2024AY 2014-15

Bench: Him The Order Passed Under Section 143(3) Of The Income Tax Act, [ For Short “Act” ] By The Acit, Circle, Sri Ganganagar [

For Appellant: Shri P.C. Parwal (C.A.)For Respondent: Ms. Alka Gautam (CIT) (V.H.)
Section 143(3)Section 14ASection 36(1)(iii)

Gupta It is a settled law that where interest bearing funds have been advanced to other persons in the course of business out of “commercial expediency”, the interest cannot be disallowed u/s 36(1)(iii) of the Act. Reliance in the connection is placed on the following case laws ... whether the interest free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. 25. The expression "commercial expediency" is an expression of wide import and includes such expenditure

Bank of Baroda ( Erstwhile Vijaya Bank), Mumbai vs. Joint Commissioner of Income Tax, Ltu, Bangalore

In the result, the appeal filed by the assessee in ITA No

ITA 1040/BANG/2024[2017-18]Status: DisposedITAT Bangalore28 Nov 2024AY 2017-18

Bench: Shri Waseem Ahmed & Shri Soundararajan K.

For Appellant: Smt. Lalitha Rameswaran, CA &For Respondent: Shri Sridhar .E, CIT-DR
Section 115JSection 135Section 37

incurred based on the guidelines framed by Government of India on CSR for Central Public Sector Enterprises, u expenditure would meet the grounds of commercial expediency and accordingly. such expenditure would be allowable u/s 37. 2.3. The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision ... incurred based on the guidelines framed by Government of India on CSR for Central Public Sector Enterprises, such expenditure would meet the grounds of commercial expediency and accordingly, such expenditure would be allowable u/s 37. 2.3 The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision

Bank of Baroda, Mumbai vs. Joint Commissioner of Income Tax, Ltu, Bangalore

In the result, the appeal filed by the assessee in ITA No

ITA 1033/BANG/2024[2016-17]Status: DisposedITAT Bangalore28 Nov 2024AY 2016-17

Bench: Shri Waseem Ahmed & Shri Soundararajan K.

For Appellant: Smt. Lalitha Rameswaran, CA &For Respondent: Shri Sridhar .E, CIT-DR
Section 115JSection 135Section 37

incurred based on the guidelines framed by Government of India on CSR for Central Public Sector Enterprises, u expenditure would meet the grounds of commercial expediency and accordingly. such expenditure would be allowable u/s 37. 2.3. The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision ... incurred based on the guidelines framed by Government of India on CSR for Central Public Sector Enterprises, such expenditure would meet the grounds of commercial expediency and accordingly, such expenditure would be allowable u/s 37. 2.3 The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision

Bank of Baroda, Mumbai vs. Joint Commissioner of Income Tax, Ltu, Bangalore

In the result, the appeal filed by the assessee in ITA No

ITA 1032/BANG/2024[2014-15]Status: DisposedITAT Bangalore28 Nov 2024AY 2014-15

Bench: Shri Waseem Ahmed & Shri Soundararajan K.

For Appellant: Smt. Lalitha Rameswaran, CA &For Respondent: Shri Sridhar .E, CIT-DR
Section 115JSection 135Section 37

incurred based on the guidelines framed by Government of India on CSR for Central Public Sector Enterprises, u expenditure would meet the grounds of commercial expediency and accordingly. such expenditure would be allowable u/s 37. 2.3. The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision ... incurred based on the guidelines framed by Government of India on CSR for Central Public Sector Enterprises, such expenditure would meet the grounds of commercial expediency and accordingly, such expenditure would be allowable u/s 37. 2.3 The learned Commissioner of Income Tax (Appeals) erred in not following the binding decision

Siwana Agri Marketing Limited (Now Merged With Vital Connections LLP), Ahmedabad vs. Assistant Commissioner of Income Tax, Circle 4(1)(1), Ahmedabad

In the result, the appeal of the assessee is allowed

ITA 1094/AHD/2024[2017-18]Status: DisposedITAT Ahmedabad27 Nov 2024AY 2017-18

Bench: Shri Siddhartha Nautiyal & Shri Makarand V. Mahadeokarआयकर अपील सं /Ita No.1094/Ahd/2024 िनधा"रण वष" /Assessment Year : 2017-18 Siwana Agri Marketing Ltd. The Acit बनाम/ (Now Merged With Vital Circle-4(1)(1) V/S. Connections Llp) Ahmedabad 401, Ashopalav Apartments Near Suvidha Shopping Centre Paldi Ahmedabad – 380 007 (Gujarat) "थायी लेखा सं./Pan: Aaccs 9598 J (अपीलाथ&/ Appellant) ('( यथ&/ Respondent) Assessee By : Shri Prakash D. Shah, Ar Revenue By : Shri Atul Pandey, Sr.Dr सुनवाई की तारीख/Date Of Hearing : 25/11/2024 घोषणा की तारीख /Date Of Pronouncement: 27/11/2024 आदेश/O R D E R Per Makarand V. Mahadeokar, Am:

For Appellant: Shri Prakash D. Shah, ARFor Respondent: Shri Atul Pandey, Sr.DR
Section 143(3)Section 250Section 36(1)(iii)Section 36(2)

nexus between interest-free funds and advances of Rs.5.48 crores. The CIT(A) emphasized that the assessee failed to demonstrate any business purpose or commercial expediency for the advances, which is a key requirement under Section 36(1)(iii). Reliance was placed on the Hon’ble Supreme Court’s judgment ... misplaced. While that case emphasizes the Siwana Agri Marketing Ltd. (now merged with Vital Connections LLP) vs. ACIT Asst. Year : 2017-18 requirement of commercial expediency, the principles laid down in CIT v. Reliance Industries Ltd. (supra), a subsequent Hon’ble Supreme Court’s decision, clarify that where sufficient interest

Income Tax Officer, Ward-9(1), Kolkata vs. Kali Fabrics Private Limited, Kolkata

In the result, appeal of the revenue is dismissed

ITA 291/KOL/2024[2018]Status: DisposedITAT Kolkata27 Nov 2024

Bench: Shri Rajesh Kumar, Am & Shri Sonjoy Sarma, Jm]

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

Therefore, non-charging of interest was fully justified by the appellant and the same could be said to have been out of commercial expediency. In such a scenario the ratio of decision of Hon'ble Supreme Court in the case of S.A. Builders Ltd. (supra) would be applicable wherein ... nexus between the expenditure and purposes of business, deduction u/s 36(1 ) (iii) was to be allowed. It was further held that the expression 'commercial expediency' is an expression of wide import and includes such expenditure as prudent businessman incurs for the purpose of business. The total expenditure incurred toward

Income Tax Officer, Ward 7(2)(1), Mumbai, Income Tax Department vs. Monarch Technobuild Private Limted, Mumbai

In the result, the appeal of Revenue as well as the Cross

ITA 1287/MUM/2024[2012-13]Status: DisposedITAT Mumbai27 Nov 2024AY 2012-13

Bench: Shri Om Prakash Kant & Shri Sandeep Singh Karhail: A.Y. : 2012-13 C.O. No. 172/Mum/2024 A.Y. : 2012-13 (Arising Out Of Ita No. 1287/M/24)

For Appellant: Shri Snehal ShahFor Respondent: Shri Sunil A. Umap, CIT-DR
Section 143(1)Section 148Section 68Section 69A

concerned AO examined the transaction of Rs. 10 crores. The AO rejected the contention of the assessee that was a business transaction under the commercial expediency. The relevant findings of the AO in the case of M/s. Global Buildcon Pvt. Ltd., is reproduced as under: “5.4 After considering MOUs dated ... Crores out of interest bearing loan of Rs 25 crores. The assessee company mainly contended that it was a business advance and covered under commercial expediency. "Commercial expediency" point is examined as under: i. The MOUs are between related parties and In MOUs, no third party is involved. Therefore, these

DCIT, Circle- 27(2), New Delhi vs. Wharton Engineers & Developers Pvt. Ltd. (Earlier Wilful Finance Investment Co. Pvt.), New Delhi

In the result the appeal of the revenue is dismissed

ITA 7841/DEL/2018[2014-15]Status: DisposedITAT Delhi27 Nov 2024AY 2014-15

Bench: Sh. Pradip Kumar Kedia & Sh. Sudhir Kumarassessment Year: 2014-15 Dcit Vs. Wharton Engineers & Circle 27 (2) Developers Pvt. Ltd. New Delhi (Earlier Willful Finance Investment Co.Pvt.) New Delhi Pan No.Aaacw0629C (Appellant) (Respondent)

Section 115BSection 142(1)Section 143(2)Section 143(3)Section 37

business" is wider in scope than the expression for the purpose of earning profits". For the purpose of business" includes expenditure voluntarily Incurred for commercial expediency, and it is immaterial if a third party also benefits thereby. Once it is established that there was nexus between the expenditure and purpose