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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

DCIT, Chennai vs. M/S, Sundaram Finance Ltd., Chennai

ITA 26/CHNY/2018[2010-11]Status: DisposedITAT Chennai28 Jun 2024AY 2010-11

Bench: Shri Aby T Varkey, Hon’Ble & Shri S. R. Raghunatha, Hon’Bleआयकरअपीलसं./Ita Nos.: 07, 08 & 09/Chny/2018 िनधा"रणवष" / Assessment Years: 2010-11, 2011-12 & 2011-12 Deputy Commissioner Of Income Sundaram Finance Limited, V. Tax, 21, Patullos Road, Large Taxpayer Unit -1, Chennai – 600 002. Chennai – 34. [Pan: Aaacs-4944-A] (अपीलाथ"/Appellant) (""यथ"/Respondent) आयकरअपीलसं./Ita Nos.: 26, 27 & 28/Chny/2018 िनधा"रणवष" / Assessment Years: 2010-11, 2011-12 & 2011-12 Sundaram Finance Limited, Deputy Commissioner Of Income V. 21, Patullos Road, Tax, Chennai – 600 002. Large Taxpayer Unit -1, [Pan: Aaacs-4944-A] Chennai – 34. (अपीलाथ"/Appellant) (""यथ"/Respondent)

For Appellant: Shri. R. vijayaraghavan, AdvocateFor Respondent: Shri. V. Nandakumar, CIT
Section 143(3)

considering the huge turnover,Profits declared, customer base and employees of the assessee company, the amount of expenditure spent forpooja expenses as a commercial expediency to the business and claiming such expenditure is reasonable. The amount spent towards Pooja expenses is a miniscule compare to the turnover and profits ... denied as inadmissible expenditure. Therefore, we are of the considered view that the said expenditure is spent by the assessee company is a commercial expediency and claiming the same as business expenditure cannot be termed as personal in nature and hence appeal of the assessee is allowed by dismissing

Pune Mathadi Hamal and Other Manual Workers Board, Pune vs. Income Tax Officer, Ward-5(1), Pune

In the result, appeal of the assessee is partly allowed

ITA 1012/PUN/2023[2018-19]Status: DisposedITAT Pune27 Jun 2024AY 2018-19

Bench: Shri S.S.Godara & Dr. Dipak P. Ripoteआयकर अपील सं. / Ita No.1012/Pun/2023 िनधा"रण वष" / Assessment Year : 2018-19 Pune Mathadihamal & Other The Income Tax Manual Workers Board, V Officer, Shramashakti Bhavan, S Ward-5(1), Pune. Coomercial Plot No.1, Market Yard, Pune – 411037. Pan: Aaalp0097L Appellant/ Assessee Respondent /Revenue Assessee By Shri Vipul Joshi – Ar Revenue By Shri Ajay Kumar Keshari & Shri Rajesh Gawali– Dr’S Date Of Hearing 17/04/2024 Date Of Pronouncement 27/06/2024 आदेश/ Order Per Dr. Dipak P. Ripote, Am: This Appeal Filed By The Assessee Is Against The Orders Of Ld.Commissionerof Income Tax(Appeals)[Nfac], Under Section 250 Of The Act Dated 14.07.2023 :

For Appellant: 2. The ld.AR submitted written submissions, relevant part of the same is reprodu
Section 11Section 12ASection 143(3)Section 250

record and thus, there was no warrant for disallowance paid to TACL by the assessee when the payment was adjudged on the principle of commercial expediency when viewed from the point of view of a prudent businessman. 11. The present appeal filed by the department/revenue thus deserves to be dismissed

Assistant Commissioner of Income Tax, Mumbai vs. Sonata Information Technology Limited, Mumbai

Appeal are dismissed

ITA 1359/MUM/2024[2015-2016]Status: DisposedITAT Mumbai27 Jun 2024AY 2015-2016
For Respondent: Dr. Kishor Dhule
Section 10ASection 115JSection 143(3)Section 37Section 40

best interest of the business between two independent corporate entities. It has also been contended that the same has been incurred out of commercial expediency. It has further been submitted that it is the prerogative of the businessman as to how to run its business and the Department should

Assistant Commissioner of Income Tax Circle 3 4 Mumbai, Mumbai vs. Sonata Information Technology Limited, Mumbai

Appeal are dismissed

ITA 1352/MUM/2024[2016-2017]Status: DisposedITAT Mumbai27 Jun 2024AY 2016-2017

Bench: SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY (Judicial Member)

For Respondent: Dr. Kishor Dhule
Section 10ASection 115JSection 143(3)Section 37Section 40

best interest of the business between two independent corporate entities. It has also been contended that the same has been incurred out of commercial expediency. It has further been submitted that it is the prerogative of the businessman as to how to run its business and the Department should

Deputy Commissioner of Income Tax (Central Circle)-8(3), Mumbai vs. Afcons Infrastructure Limited, Andheri West

The appeal are dismissed

ITA 1152/MUM/2024[2011-12]Status: DisposedITAT Mumbai26 Jun 2024AY 2011-12

Bench: us. The Learned Departmental Representative submitted that the Revenue had filed the appeal electronically and thereafter, furnished appeals in physical form. Two separate appeal numbers, being ITA No. 1152/Mum/2024 and ITA No. 1153/Mum/2024, were inadvertently allotted by the Registry for the same appeal. It was submitted that ITA No. 1152/Mum/2024 listed before us be treated as a duplicate appeal and be dismissed as withdrawn. The Learned Authorized Representative did not have any objecti

For Appellant: Shri Madhur AgrawalFor Respondent: Shri Ajay Chandra
Section 143(3)Section 147

Kumar Enterprises (INR 6,05,98,000/-) and Shivam Enterprises (INR 2,75,32,000/-) engaged as sub- contractors and as well as the commercial expediency of making such payments. Notices issued under Section 133(6) of the Act to both the aforesaid parties could not be served at their

ITO-19(3)(1), Mumbai vs. Shankarlal Bhimraj Bhansali, Mumbai

In the result, appeal is dismissed

ITA 807/MUM/2024[2010-11]Status: DisposedITAT Mumbai25 Jun 2024AY 2010-11

Bench: SHRI AMIT SHUKLA (Judicial Member), SHRI RATNESH NANDAN SAHAY (Accountant Member)

For Appellant: NoneFor Respondent: Shri P.D. Chougule, SR. D.R
Section 250

debited to the Trading/profit and Los account, the onus is on the assessee to substantiate and prove the genuineness of the claim and commercial expediency of incurring such expenditure, which the assessee has failed to prove the during the assessment proceedings?” 6. "Whether on the facts and in the circumstances ... debited to the Trading/ Profit & Loss A/c., the onus is on the assessee to substantiate and prove the genuineness of the claim and the commercial expediency of incurring such expenditure. In the circumstances, following the principle of natural justice, the assessee was given an opportunity vide order-sheet dated 05/03/2015

DCIT 3(4), Mumbai vs. Tata Consultancy Services Ltd., Mumbai

Accordingly. This ground is allowed for statistical purposes

ITA 2477/MUM/2021[2015-16]Status: DisposedITAT Mumbai21 Jun 2024AY 2015-16

Bench: Shri Narendra Kumar Billaiya & Shri Anikesh Banerjee

For Appellant: S/Shri Porus F.Kaka & Manish KanthFor Respondent: Ms.Dhivya Ruth J, Sr.DR
Section 143(3)

both the assessee and the AEs, therefore, in form and substance, the nature of the transaction is loan only. Dismissing the contention of commercial expediency, the TPO observed that the facts remains that the assessee and the AEs are two different corporate entities functioning in two geographical boundaries as separate

Tata Consultance Services Ltd, Mumbai vs. DCIT Ltu-1, Mumbai

In the result, the appeal filed by the Revenue and the assessee are dismissed

ITA 2413/MUM/2021[2015-16]Status: DisposedITAT Mumbai21 Jun 2024AY 2015-16

Bench: Shri Narendra Kumar Billaiya & Shri Anikesh Banerjee

For Appellant: S/Shri Porus F.Kaka & Manish KanthFor Respondent: Ms.Dhivya Ruth J, Sr.DR
Section 143(3)

both the assessee and the AEs, therefore, in form and substance, the nature of the transaction is loan only. Dismissing the contention of commercial expediency, the TPO observed that the facts remains that the assessee and the AEs are two different corporate entities functioning in two geographical boundaries as separate

DCIT-19(3), Mumbai vs. Shrenik Dheerajmal Siroya, Mumbai

In the result, the appeal by the Revenue for the assessment year 2012-

ITA 3031/MUM/2023[2012-13]Status: DisposedITAT Mumbai18 Jun 2024AY 2012-13

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Vimal Punmiya/Prakash BohraFor Respondent: Shri Manoj Kumar Singh
Section 14ASection 250Section 36(1)(iii)

circumstances of the case, the Ld. CIT(A) was right in ignoring the AO‟s observation that the assessee has failed to establish commercial expediency of the interest bearing loan invested in acquiring assets for projects and income was not generated during the year under consideration?” 7 g. “In this

DCIT-19(3), Mumbai vs. Shrenik Dheerajmal Siroya, Mumbai

In the result, the appeal by the Revenue for the assessment year 2012-

ITA 3030/MUM/2023[2014-15]Status: DisposedITAT Mumbai18 Jun 2024AY 2014-15

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Vimal Punmiya/Prakash BohraFor Respondent: Shri Manoj Kumar Singh
Section 14ASection 250Section 36(1)(iii)

circumstances of the case, the Ld. CIT(A) was right in ignoring the AO‟s observation that the assessee has failed to establish commercial expediency of the interest bearing loan invested in acquiring assets for projects and income was not generated during the year under consideration?” 7 g. “In this

DCIT-19(3), Mumbai vs. Shrenik Dheerajmal Siroya, Mumbai

In the result, the appeal by the Revenue for the assessment year 2012-

ITA 3004/MUM/2023[2013]Status: DisposedITAT Mumbai18 Jun 2024

Bench: Shri Prashant Maharishi & Shri Sandeep Singh Karhail

For Appellant: Shri Vimal Punmiya/Prakash BohraFor Respondent: Shri Manoj Kumar Singh
Section 14ASection 250Section 36(1)(iii)

circumstances of the case, the Ld. CIT(A) was right in ignoring the AO‟s observation that the assessee has failed to establish commercial expediency of the interest bearing loan invested in acquiring assets for projects and income was not generated during the year under consideration?” 7 g. “In this

Beacon Higher Education Services Pvt Ltd, New Delhi vs. DCIT Circle-4(2), New Delhi

In the result, the appeal of the assessee is allowed

ITA 1748/DEL/2019[2012-13]Status: DisposedITAT Delhi14 Jun 2024AY 2012-13

Bench: Shri Saktijit Dey, Hon’Ble & Shri M. Balaganeshm/S. Beacon Higher Education Vs. Dcit, Services Pvt. Ltd, Circle-4(2), S-40, 2Nd Floor, Vasant Square Delhi Mall, Plot No. A, Sector-B, Vasant Kunj, New Delhi (Appellant) (Respondent) Pan:Aaecb1283F

For Appellant: Shri V. K. Agarwal, ARFor Respondent: Shri Kanv Bali, Sr. DR
Section 143(3)Section 36(1)(iii)

balance amount of Rs 53.34 crores, the assessee has to explain whether the lending and investment made in subsidiary company was out of commercial expediency. The assessee by making equity investment of Rs 7.64 crores in GLMPL was able to obtain controlling interest of 52.31%. These facts are staring ... objects with that of the assessee, the amounts advanced by the assessee company to its subsidiary would have to be construed only out of commercial expediency. The ld. AR further submitted that GLMPL out of funds received from the assessee , had in turn advanced funds to Great Lakes Institute

Income Tax Officer-19(2)(2), Mumbai vs. Mukesh Hirachand Sanghvi, Mumbai

In the result, the appeal filed by the revenue stands

ITA 3510/MUM/2023[2009-10]Status: DisposedITAT Mumbai11 Jun 2024AY 2009-10
Section 133(6)Section 143(3)Section 145(3)Section 147Section 148Section 250Section 263Section 271(1)(C)Section 36(1)(iii)

circumstances of the case, the Ld. CIT(A) is right in ignoring he AO's observation that the assessee has failed to establish “Commercial Expediency” of the interest bearing loan/advances given to various parties and failed to prove the nexus between advancing the funds and expansion of own business ... A.Y.2011-12. He further submitted that the loan advances of Rs. 1,09,00,000/— were given to three parties by the assessee for commercial expediency with intention to expand his business. He further submitted that learned CIT(A) has rightly deleted the addition

Panchsheel Buildtech Private Limited, Delhi vs. Pr, CIT, Ghaziabad

In the result, the appeal is allowed

ITA 614/DEL/2021[2016-17]Status: DisposedITAT Delhi10 Jun 2024AY 2016-17

Bench: Shri G.S. Pannu, Vice- & Shri Anubhav Sharmaassessment Year: 2016-17 Panchsheel Buildtech Vs. Principal Cit, Private Limited., G-124, Ghaziabad. Shor No.5, Dilshad Garden, Delhi -1100 95 Pan: Aaecp3492N (Appellant) (Respondent)

Section 143(3)Section 263Section 40aSection 43B

arrangement. It is for the entities to decide what kind of business obligations to be executed after taking into consideration, questions of commercial expediency. It is not open for anyone else to question or decide the best business strategy for the parties carrying on the business. Also, it has been

C.M.D. Ratnakar Dy. Commissioner of Income Tax, Circle 2(1), Hyderabad vs. Jasper Industries Private Limited, Hyderabad

In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed

ITA 6/HYD/2021[2016-17`]Status: DisposedITAT Hyderabad05 Jun 2024

Bench: Shri Laliet Kumar, Hon'Ble & Shri Manjunatha G., Hon'Bleधििाारण वर्ा आ.अपी.सं अपीलार्थी / प्रत्‍यर्थी / / A.Y. Appellant Respondent / Ita No. M/S. Jasper Asst. Commissioner Industries Private Of Income Tax, Limited, 781/Hyd/2020 2016-17 Circle-2(1), Hyderabad Hyderabad [Pan: Aaacj5760H] M/S. Jasper Dy. Commissioner Industries Private Of Income Tax, 6/Hyd/2021 2016-17 Limited, Circle-2(1), Hyderabad Hyderabad [Pan: Aaacj5760H]

For Appellant: Shri C.S. Subrahmanyam and Shri EV Sri Krishna, ARsFor Respondent: Shri K. Meghnath Chowhan, CIT-DR
Section 14A

free reserves of the appellant. (e) The Ld. CIT(A) ought to have appreciated that the impugned investment in subsidiaries is purely for commercial expediency, and being a part of expanding its activities, thereby complimenting and supplementing the assessee own business. (f) The Ld. CIT(A) ought to have appreciated ... argument of the Ld.Counsel for the assessee before the lower authorities that investment in equity instruments of various companies is for the purpose of commercial expediency. The assessee being a dealer of Tata Motors, has made investment in various joint ventures, promoted by Tata Group, which have directly or indirectly

Jasper Industries Private Limited, Hyderabad vs. Assistant Commissioner of Income Tax, Circle -2(1), Hyderabad

In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed

ITA 781/HYD/2020[2016-17]Status: DisposedITAT Hyderabad05 Jun 2024AY 2016-17

Bench: Shri Laliet Kumar, Hon'Ble & Shri Manjunatha G., Hon'Bleधििाारण वर्ा आ.अपी.सं अपीलार्थी / प्रत्‍यर्थी / / A.Y. Appellant Respondent / Ita No. M/S. Jasper Asst. Commissioner Industries Private Of Income Tax, Limited, 781/Hyd/2020 2016-17 Circle-2(1), Hyderabad Hyderabad [Pan: Aaacj5760H] M/S. Jasper Dy. Commissioner Industries Private Of Income Tax, 6/Hyd/2021 2016-17 Limited, Circle-2(1), Hyderabad Hyderabad [Pan: Aaacj5760H]

For Appellant: Shri C.S. Subrahmanyam and Shri EV Sri Krishna, ARsFor Respondent: Shri K. Meghnath Chowhan, CIT-DR
Section 14A

free reserves of the appellant. (e) The Ld. CIT(A) ought to have appreciated that the impugned investment in subsidiaries is purely for commercial expediency, and being a part of expanding its activities, thereby complimenting and supplementing the assessee own business. (f) The Ld. CIT(A) ought to have appreciated ... argument of the Ld.Counsel for the assessee before the lower authorities that investment in equity instruments of various companies is for the purpose of commercial expediency. The assessee being a dealer of Tata Motors, has made investment in various joint ventures, promoted by Tata Group, which have directly or indirectly

Keventer Agro Limited, Kolkata vs. DCIT, Cir. 4(1), Kolkata

ITA 396/KOL/2024[2015-16]Status: DisposedITAT Kolkata05 Jun 2024AY 2015-16

Bench: Sri Sanjay Garg & Sri Sanjay Awasthi

Section 143(3)Section 250Section 32Section 37(1)Section 43B

within the purview of sec 37(1) of the Act in spite of the fact that payment towards advertisements in souvenirs during festivities for commercial expediency is to be considered from the businessman’s stand point and hence an allowable expenditure u/s 37(1) of the Act. 6. That ... averred that considering the nature of business of the appellant which pertains to the manufacturing and sale of dairy products, there is considerable commercial expediency in incurring such expenses. Ld. A/R has relied on the case of CIT vs. Bata India Ltd. reported in [1993] Page 9 of 11 I.T.A

Ind Swift Laboratories Ltd., Chandigarh vs. DCIT, Circle 1(1), Chandigarh

In the result, the appeal is allowed, as indicated

ITA 350/CHANDI/2023[2017-18]Status: DisposedITAT Chandigarh04 Jun 2024AY 2017-18

Bench: SHRI A.D.JAIN (Vice President), SHRI KRINWANT SAHAY (Accountant Member)

For Appellant: Shri T.N.Singla, C.AFor Respondent: Shri Rohit Sharma, CIT-DR
Section 250Section 35Section 35(1)Section 35(1)(i)Section 35(2)

Fortune Constructions for business purposes and loans and advances were given by the assessee to ITA 350/CHD/2023 A.Y. 2017-18 16 Fortune Constructions for commercial expediency, in order to save its investment in Fortune Constructions and to earn profit on these shares. 18. The learned Counsel has submitted that ... Commissioner had found that the assessee and its sister concern were in the hotel business and the advance was as a measure of commercial expediency and only for the purpose of the business of the sister concern; that the funds advanced had been used for the purpose of business

M/S Midas Shelters Private Limited, Pune vs. ITO, Ward 14(3), Pune

Appeal is allowed for statistical

ITA 287/PUN/2024[2016-17]Status: DisposedITAT Pune03 Jun 2024AY 2016-17

Bench: Shri Rama Kanta Panda & Shri Satbeer Singh Godara

For Appellant: Shri Suhas P. BoraFor Respondent: Shri Keyur Patel, CIT-DR
Section 143(3)Section 271(1)(c)Section 36(1)(iii)

reply in penalty proceedings whereas the relevant factual position speaks otherwise. His further case is that it was a clear-cut case of “commercial expediency” wherein the assessee had made interest free advances to it’s related parties squarely covered by S.A Builders

M/S Kantar Gdc India Pvt. Ltd. (Formerly Tns India Pvt Ltd), Hyderabad vs. Dy. Commissioner of Income Tax, Circle-2(2), Hyderabad

In the result, appeal filed by the assessee is allowed for statistical purposes

ITA 2261/HYD/2017[2013-14]Status: HeardITAT Hyderabad03 Jun 2024AY 2013-14

Bench: Shri Mahavir Singh & Shri Manjunatha, G.आ.अपी.सं /Ita No.2261/Hyd/2017 (िनधा"रण वष"/Assessment Year: 2013-14) M/S. Kantar Gdc India (P) Vs. Dy. C. I. T. Ltd (Formerly Tns India (P) Circle 2(2) Ltd, Hyderabad Hyderabad Pan:Aabcn2278F (Appellant) (Respondent) िनधा""रती "ारा/Assessee By: Advocate Harpreet Singh Ajmani राज" व "ारा/Revenue By:: Shri Shiva Sewak, Cit(Dr) सुनवाई की तारीख/Date Of Hearing: 15/05/2024 घोषणा की तारीख/Pronouncement: 03/06/2024 आदेश/Order

For Appellant: Advocate Harpreet Singh AjmaniFor Respondent: : Shri Shiva Sewak, CIT(DR)
Section 143(3)Section 144C(5)Section 271(1)(c)

being paid by the Appellant, c) Not appreciating the requirement to incur the management fees and trademark license fees disregarding the principles of commercial expediency. TDS Credit 6. Allowing credit of TDS of Rs. 12,24,29,606 instead of Rs. 12,25,25,224 as claimed in the Return