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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

Deputy Commissioner of Income Tax, Centre-Circle-6(4), New Delhi vs. Juventus Estate Ltd., New Dlhi

In the result appeal filed by the learned assessing officer for assessment year 2017 – 18 is allowed for statistical purposes

ITA 1436/MUM/2022[2012-13]Status: DisposedITAT Mumbai27 Oct 2022AY 2012-13

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Sh. K Gopal, ARFor Respondent: Sh. Dharamveer Singh, CIT DR
Section 132Section 143Section 153ASection 56Section 69A

because the above income was derived from the fixed deposits made in the normal course of its business and has absolute commercial expediency while doing so. The learned assessing officer disagreed with argument of the assessee and held that with respect to the interest on income tax refund, the same ... discussed. It was stated that the fixed deposit receipts made by the assessee is in the normal course of its business and had absolute commercial expediency while doing so and thus the nature of the income of the assessee company must be treated as business income. Further this issue

Deputy Commissioner of Income Tax, Centre-Circle-6(4), New Delhi vs. Juventus Estate Ltd., New Dlhi

In the result appeal filed by the learned assessing officer for assessment year 2017 – 18 is allowed for statistical purposes

ITA 1424/MUM/2022[2012-13]Status: DisposedITAT Mumbai27 Oct 2022AY 2012-13

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Sh. K Gopal, ARFor Respondent: Sh. Dharamveer Singh, CIT DR
Section 132Section 143Section 153ASection 56Section 69A

because the above income was derived from the fixed deposits made in the normal course of its business and has absolute commercial expediency while doing so. The learned assessing officer disagreed with argument of the assessee and held that with respect to the interest on income tax refund, the same ... discussed. It was stated that the fixed deposit receipts made by the assessee is in the normal course of its business and had absolute commercial expediency while doing so and thus the nature of the income of the assessee company must be treated as business income. Further this issue

Deputy Commissioner of Income Tax, Centre-Circle-6(4), New Delhi vs. Juventus Estate Ltd., New Dlhi

In the result appeal filed by the learned assessing officer for assessment year 2017 – 18 is allowed for statistical purposes

ITA 1423/MUM/2022[2011-12]Status: DisposedITAT Mumbai27 Oct 2022AY 2011-12

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Sh. K Gopal, ARFor Respondent: Sh. Dharamveer Singh, CIT DR
Section 132Section 143Section 153ASection 56Section 69A

because the above income was derived from the fixed deposits made in the normal course of its business and has absolute commercial expediency while doing so. The learned assessing officer disagreed with argument of the assessee and held that with respect to the interest on income tax refund, the same ... discussed. It was stated that the fixed deposit receipts made by the assessee is in the normal course of its business and had absolute commercial expediency while doing so and thus the nature of the income of the assessee company must be treated as business income. Further this issue

ACIT Cent. Cir 6(4), Mumbai vs. Juventus Estate Ltd, Mumbai

In the result appeal filed by the learned assessing officer for assessment year 2017 – 18 is allowed for statistical purposes

ITA 2379/MUM/2021[2017-18]Status: DisposedITAT Mumbai27 Oct 2022AY 2017-18

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Sh. K Gopal, ARFor Respondent: Sh. Dharamveer Singh, CIT DR
Section 132Section 143Section 153ASection 56Section 69A

because the above income was derived from the fixed deposits made in the normal course of its business and has absolute commercial expediency while doing so. The learned assessing officer disagreed with argument of the assessee and held that with respect to the interest on income tax refund, the same ... discussed. It was stated that the fixed deposit receipts made by the assessee is in the normal course of its business and had absolute commercial expediency while doing so and thus the nature of the income of the assessee company must be treated as business income. Further this issue

ACIT Cent. Cir 6(4), Mumbai vs. Juventus Estate Ltd, Mumbai

In the result appeal filed by the learned assessing officer for assessment year 2017 – 18 is allowed for statistical purposes

ITA 2377/MUM/2021[2013-14]Status: DisposedITAT Mumbai27 Oct 2022AY 2013-14

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Sh. K Gopal, ARFor Respondent: Sh. Dharamveer Singh, CIT DR
Section 132Section 143Section 153ASection 56Section 69A

because the above income was derived from the fixed deposits made in the normal course of its business and has absolute commercial expediency while doing so. The learned assessing officer disagreed with argument of the assessee and held that with respect to the interest on income tax refund, the same ... discussed. It was stated that the fixed deposit receipts made by the assessee is in the normal course of its business and had absolute commercial expediency while doing so and thus the nature of the income of the assessee company must be treated as business income. Further this issue

Bsr Infratech India Limited, Bangalore vs. Deputy Commissioner of Income Tax, Central Circle-2(1), Bangalore

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

ITA 697/BANG/2022[2017-18]Status: DisposedITAT Bangalore27 Oct 2022AY 2017-18

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2017-18

For Appellant: Shri Madhusudhan, A.RFor Respondent: Shri Praveen Karanth, D.R
Section 199Section 234ASection 270ASection 43Section 43C

nothing to suggest the parties were not belong with each other at arm’s length and there is no situation of any collusion, commercial expediency of the contract is to be adjusted by the contracting parties as to its terms. It was further made clear that ….. under the taxing system

The Joint Commissioner of Income Tax(OSD), Chennai vs. Emerald Haven Reality Ltd, Chennai

Appeal stands dismissed

ITA 38/CHNY/2021[2014-15]Status: DisposedITAT Chennai26 Oct 2022AY 2014-15

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri R. Vijayaraghavan (Advocate) – Ld. ARFor Respondent: Shri AR V Sreenivasan (Addl. CIT) –Ld. Sr. DR
Section 143(3)

assessee. 11. From the facts, it emerges that the assessee has lent surplus funds to another entity which are not business advances. No commercial expediency of advances could be demonstrated by the assessee. The assessee claimed the write-off of advances as irrecoverable u/s 36(1)(vii) which applies

The Joint Commissioner of Income Tax(OSD), Chennai vs. Emerald Haven Reality Ltd, Chennai

Appeal stands dismissed

ITA 37/CHNY/2021[2013-14]Status: DisposedITAT Chennai26 Oct 2022AY 2013-14

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri R. Vijayaraghavan (Advocate) – Ld. ARFor Respondent: Shri AR V Sreenivasan (Addl. CIT) –Ld. Sr. DR
Section 143(3)

assessee. 11. From the facts, it emerges that the assessee has lent surplus funds to another entity which are not business advances. No commercial expediency of advances could be demonstrated by the assessee. The assessee claimed the write-off of advances as irrecoverable u/s 36(1)(vii) which applies

Emerald Haven Realty Ltd., Chennai vs. ACIT Corporate Circle 2, Chennai

Appeal stands dismissed

ITA 634/CHNY/2020[2014-15]Status: DisposedITAT Chennai26 Oct 2022AY 2014-15

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri R. Vijayaraghavan (Advocate) – Ld. ARFor Respondent: Shri AR V Sreenivasan (Addl. CIT) –Ld. Sr. DR
Section 143(3)

assessee. 11. From the facts, it emerges that the assessee has lent surplus funds to another entity which are not business advances. No commercial expediency of advances could be demonstrated by the assessee. The assessee claimed the write-off of advances as irrecoverable u/s 36(1)(vii) which applies

M/S. Resource Realty P. Ltd., Mumbai vs. ACIT-Central Circle-11(1)(1), Mumbai

In the result, the appeal of the assessee stand dismissed

ITA 1831/MUM/2020[2013-14]Status: DisposedITAT Mumbai21 Oct 2022AY 2013-14

Bench: Shri Aby T Varkey & Shri Amarjit Singhm/S Resources Realty Vs. Acit, Central Circle- Private Limited, 11(1)(1), Room No. 4, 4Th Floor, Dheeraj Arma, 3Rd Floor, Mittal Court, Anant Kanekar Marg, Nariman Point, Bandra (East), Mumbai – 400021 Mumbai – 400 051 स्थायी लेखा सं./जीआइआर सं./ Pan/Gir No: Aaecr0433R Appellant .. Respondent Appellant By : None Respondent By : Mahita Nair Date Of Hearing 17.10.2022 Date Of Pronouncement 21.10.2022 आदेश / O R D E R Per Amarjit Singh (Am):

For Appellant: NoneFor Respondent: Mahita Nair
Section 143(2)Section 143(3)Section 36(1)(iii)Section 37

assessee the ld. CIT(A) held that the impugned loan was not advanced in the course of assessee’s business and there was no commercial expediency of any sort as no plea on this ground has been taken neither before the A.O in the assessment proceedings nor before

DCIT- CC-3(1), Mumbai vs. Nirmal Lifestyle (Pune) Pvt. Ltd., Mumbai

In the result, we agree with the findings and formulas given by the Ld

ITA 3088/MUM/2018[2013-14]Status: DisposedITAT Mumbai20 Oct 2022AY 2013-14

Bench: Shri Aby T Varkey & Shri Gagan Goyal

For Appellant: Dr. Mahesh Akhade - CIT(DR)For Respondent: Sh. Bhadresh Doshi
Section 132Section 143(3)Section 153A

Supreme Court in the case of SA Builders (supra) that if a loan is given to a subsidiary company on account of commercial expediency, no disallowance out of interest expenditure can be made, cannot be applied in the case of the assessee since the borrower i.e., Nirmal Manor ... purpose of the concern. The above arrangement not only provided a cover for the unnecessary interest Cost incurred by the Appellant but also facilitated Commercial Expediency by employing the Funds within the Group Concern. It is also a settled Law and a well-accepted fact that if the funds

JCIT (OSD) Circle-8(3)(1), Mumbai vs. M/S. Tridoss Laboratories Private Ltd., Mumbai

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

ITA 1489/MUM/2018[2002-03]Status: DisposedITAT Mumbai20 Oct 2022AY 2002-03
Section 143(3)Section 36(1)(iii)Section 37

accrued in the accounting year 1-7-1978 to 30-6-1979, there could arise no question of relinquishment of interest for any commercial expediency. There was no such question because a party could not relinquish income that had not accrued at all. The High Court had correctly found that

M/S. Tridoss Laboratories Private Ltd., Mumbai vs. ACIT Cent. Cir. - 14, Mumbai

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

ITA 1462/MUM/2018[2002-03]Status: DisposedITAT Mumbai20 Oct 2022AY 2002-03
Section 143(3)Section 36(1)(iii)Section 37

accrued in the accounting year 1-7-1978 to 30-6-1979, there could arise no question of relinquishment of interest for any commercial expediency. There was no such question because a party could not relinquish income that had not accrued at all. The High Court had correctly found that

Sb Industrial Engineering Pvt Ltd., Chennai vs. ACIT Corporate Circle 6(1), Chennai

In the result, the appeal of the Assessee in I

ITA 861/CHNY/2019[2015-16]Status: DisposedITAT Chennai19 Oct 2022AY 2015-16

Bench: Shri Mahavir Singhand Shri G. Manjunatha

For Appellant: Mr. T. Shanmugam, AdvocateFor Respondent: Mr. P. Sajit Kumar, JCIT
Section 143(3)Section 56(2)(vii)

considering the relevant submissions and also after going through the case-laws relied upon and also certain judicial proceedings, opined that there is no commercial expediency in the investment of the parent company at a premium of Rs.8/- per share. Further, the Assessee has determined the share price

ACIT Central Circle 2(1), Chennai vs. Cavinkare Pvt. Ltd., Chennai

Appeal stand allowed

ITA 1076/CHNY/2018[2008-09]Status: DisposedITAT Chennai19 Oct 2022AY 2008-09

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri T. Banusekar (C.A) – Ld. ARFor Respondent: Shri ARV Sreeenivasan (Addl. CIT) –Ld. DR
Section 143(3)Section 147Section 148Section 149Section 151Section 36(1)(iii)

services rendered. Hence this decision will not apply in the case of this assessee. (vi) Further, your objection does not state what is that commercial expediency in A.Y.2008-09 that demanded to pay a commission. Your claim that already dividend in respect of shares held has been separately paid amounting

M/S. Standard Chartered Bank, Mumbai vs. The DIT (I.T), Mumbai

In the result, appeal filed by the assessee is allowed

ITA 3345/MUM/2004[1999-2000]Status: DisposedITAT Mumbai17 Oct 2022AY 1999-2000

Bench: Shri Amit Shukla, Hon'Ble & Shri S. Rifaur Rahman, Hon'Blestandard Chartered Bank V. The Director Of Income-Tax (It) 3Rd Floor, Tax Department 1St Floor, Scindia House 23-25, M.G. Road, Fort N.M. Road Ballard Pier Mumbai - 400001 Mumbai - 400038 Pan: Aabcs4681D (Appellant) (Respondent) Assessee Represented By : Shri P.J. Pardiwala & Shri Fenil Bhatt Department Represented By : Shri. Soumendu Kumar Dash

Section 143(3)Section 263Section 37

Industries Ltd. [264 ITR 180] has held that VRS Expenditure as 5 Standard Chartered Bank deductible as revenue expenditure based on the criteria of commercial expediency  An order in consonance with the decision of Jurisdictional High Court cannot be erroneous so as to justify revision ... jurisdictional High courtin DIT V Bhor Industries Ltd.(264 TTR 180) which held the VRS expenditure was revenuein nature based on the criteria of commercial expediency.  That assuming, but not admitting that the said circular letter states the correct positionlaw, the DIT erred in stating the circular enjoined assessing officers

K Harish Kumar, Bengaluru vs. The Assistant Commissioner of Income Tax, Circle-1(2)(1), Bangalore

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

ITA 269/BANG/2022[2014-15]Status: DisposedITAT Bangalore17 Oct 2022AY 2014-15

Bench: Smt. Beena Pillai & Ms Padmavathy Sassessment Year : 2014-15 Shri K. Harish Kumar, The Assistant No. 152/2, 2Nd Floor, Commissioner Of Wheelers Road, Income Tax, Frazer Town, Circle – 1(2)(1), Bangalore – 560 005. Vs. Bangalore. Pan: Agrpk0615Q Appellant Respondent Assessee By : Shri Hemant Pai, Ca : Shri K.R. Narayana, Addl. Revenue By Cit (Dr) Date Of Hearing : 13-10-2022 Date Of Pronouncement : 17-10-2022 Order Per Beena Pillaipresent Appeal Is Filed By Assessee Against The Order Dated 18/03/2020 Passed By Ld.Cit(A)-1, Bangalore For A.Y. 2014-15 On Following Grounds Of Appeal:

For Appellant: Shri Hemant Pai, CA
Section 143(2)Section 143(3)Section 36(1)(vii)Section 37(1)Section 40

sides and perused the records based on the arguments advanced. 8. The short issue that needs to be considered is in respect of the commercial expediency towards advancement of money by the proprietary concern to the private limited company. The Ld.AR submitted that assessee had advanced these money way back ... assessee. It is also submitted that assessee is a shareholder company to which the money was advanced. Admittedly, the assessee has not established the commercial expediency for advancing the money in the past years. In our opinion, this issue needs to be reverified by going through the ledger accounts

Merck Specialities Pvt. Ltd, Mumbai vs. The Dy. Commissioner of Income Tax, Circle-7(2)(1), Mumbai

In the result, appeal by the assessee is partly allowed for statistical purpose

ITA 2056/MUM/2016[2011-12]Status: DisposedITAT Mumbai14 Oct 2022AY 2011-12

Bench: Shri Pramod Kumar & Shri Sandeep Singh Karhail

For Appellant: Ms. Aarti Vissanji a/wFor Respondent: Ms. Vatsalaa Jha
Section 143(3)Section 144C(1)Section 4Section 5Section 92CSection 92C(1)

whether a business enterprise should have incurred a particular expense or not. A business enterprise incurs the expenditure on the basis of what is commercially expedient and what is not commercially expedient. As held by Hon‟ble jurisdictional High Court in the case of CIT Vs EKL Appliances Limited ... rendered. As for the services being useless, as we have noted above, it is a call taken by the assessee whether the services are commercially expedient or not and all that the TPO can see is at what price similar services, whatever be the worth of such services, are actually

Diamonds 'R' Us, Mumbai vs. Deputy Commissioner of Income Tax - Central Circle 6(4), Mumbai

In the result, appeal filed by the Revenue is dismissed

ITA 539/MUM/2018[2014-15]Status: DisposedITAT Mumbai12 Oct 2022AY 2014-15

Bench: Shri Amit Shukla, Hon'Ble & Shri S. Rifaur Rahman, Hon'Ble

Section 36Section 36(1)(iii)

business. In the case of S.A. Builders vs. CIT [2007] 158 Taxman 74 (SC), the Supreme Court has held that the presence of commercial expediency alone determines M/s. Diamonds ‘R' US allowability u/s. 36(1)(ii) of the Act. In respect of the appellant, there is no case that interest ... free advances have been made to Shri Nirav Modi as a measure of commercial expediency. The Hon'ble Supreme Court has observed that the expression "commercial expediency" is of wide import and includes such expenditure as a prudent businessman would incur for the purpose of business. The expenditure

Diamonds 'R' Us, Mumbai vs. Deputy Commissioner of Income Tax - Central Circle 6(4), Mumbai

In the result, appeal filed by the Revenue is dismissed

ITA 538/MUM/2018[2013-14]Status: DisposedITAT Mumbai12 Oct 2022AY 2013-14

Bench: Shri Amit Shukla, Hon'Ble & Shri S. Rifaur Rahman, Hon'Ble

Section 36Section 36(1)(iii)

business. In the case of S.A. Builders vs. CIT [2007] 158 Taxman 74 (SC), the Supreme Court has held that the presence of commercial expediency alone determines M/s. Diamonds ‘R' US allowability u/s. 36(1)(ii) of the Act. In respect of the appellant, there is no case that interest ... free advances have been made to Shri Nirav Modi as a measure of commercial expediency. The Hon'ble Supreme Court has observed that the expression "commercial expediency" is of wide import and includes such expenditure as a prudent businessman would incur for the purpose of business. The expenditure