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“wholly and exclusively for business”

Business ExpensesSection 37Section 37265 judgments

The decision most relied on for wholly and exclusively for business is Hero Cycles Pvt. Ltd. v. CIT (379 ITR 347), cited in 361 judgments on BharatTax.

Leading authorities on wholly and exclusively for business

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.

Indian Molasses Co. Pvt. Ltd. v. CIT
37 ITR 66 · 1959 · Supreme Court
206
citing judgments

Expenditure is defined as money paid out or away, which is gone irretrievably. To be deductible under Section 37(1), expenditure must be wholly and exclusively for business, not capital or personal, and not fall under specific provisions of Sections 30 to 36, often justifiable on grounds of commercial expediency.

CIT v. Dhanrajgirji Raja Narasingirji
91 ITR 544 · 1973 · Supreme Court
154
citing judgments

The revenue cannot question the commercial expediency or wisdom of an expenditure incurred by a businessman, as the businessman is the best judge of their own business interests. The department's role is limited to verifying if the expenditure was genuinely incurred and was wholly and exclusively for business purposes.

Sree Meenakshi Mills Ltd. v. Commissioner of Income Tax
31 ITR 28 · 1957 · Supreme Court
137
citing judgments

Expenditure incurred for commercial expediency, even without a direct or immediate benefit but indirectly facilitating business, is deductible as laid out wholly and exclusively for trade. The scope of reference jurisdiction under Section 66 is limited to questions of law, allowing challenges to Tribunal findings of fact only if they are perverse, unreasonable, or lack evidence.

Prakash Cotton Mills Pvt. Ltd. v. CIT
201 ITR 684 · 1993 · Supreme Court
133
citing judgments

Compensatory interest or damages paid for a breach of contract, arising in the normal course of business, are allowable as a deduction under section 37(1) as wholly and exclusively incurred for business purposes. This principle extends to indirect taxes paid in the course of business, which are admissible as business expenditure.

CIT v. Nestle India Ltd.
14 Taxmann 99 · 1983 · High Court
125
citing judgments

Club entrance fees, if incurred wholly and exclusively for business purposes, are allowable as revenue expenditure under Section 37(1). Furthermore, an order holding a deductor liable for TDS defaults under Section 201 must be preceded by an inquiry into the deductee's actual tax payment.

Lachminarayan Madan Lal v. CIT
86 ITR 439 · 1972 · Supreme Court
96
citing judgments

Even with an existing agreement, the deductibility of an amount claimed as an expenditure, such as commission, must be decided based on the specific facts and circumstances of each case, to ascertain if it was laid out wholly and exclusively for business purposes.

Haji Aziz & Abdul Shakoor Bros. v. CIT
41 ITR 350 · 1961 · Supreme Court
69
citing judgments

Penalties paid for a breach of law or contravention of statutory provisions are not allowable deductions as business expenditure because they cannot be considered wholly and exclusively laid out for the purpose of the business. This principle is now enshrined in Explanation 1 to Section 37(1) of the Income-tax Act, 1961.

Judgments citing wholly and exclusively for business

Three C Universal Developers Pvt. Ltd., New Delhi vs. ACIT, Central Circle- 6, New Delhi

In the result, all the four appeals of the assessee for AYs 2010-11,

ITA 7582/DEL/2018[2014-15]Status: DisposedITAT Delhi01 May 2023AY 2014-15

Bench: Dr. Brr Kumar & Ms. Astha Chandra

For Appellant: NoneFor Respondent: Shri H.K. Chaudhary, CIT-DR
Section 132Section 142(1)Section 153ASection 234A

genuine transaction genuine Thus, it is held that the transaction with the parties (as tabularized below) is non- genuine and not incurred wholly and exclusively for business purpose,” 6. Aggrieved, the assessee filed appeal before the Ld. CIT(A). During the appellate proceedings, the assessee took the following additional grounds

Three C Universal Developers Pvt. Ltd., New Delhi vs. ACIT, Central Circle- 6, New Delhi

In the result, all the four appeals of the assessee for AYs 2010-11,

ITA 7581/DEL/2018[2013-14]Status: DisposedITAT Delhi01 May 2023AY 2013-14

Bench: Dr. Brr Kumar & Ms. Astha Chandra

For Appellant: NoneFor Respondent: Shri H.K. Chaudhary, CIT-DR
Section 132Section 142(1)Section 153ASection 234A

genuine transaction genuine Thus, it is held that the transaction with the parties (as tabularized below) is non- genuine and not incurred wholly and exclusively for business purpose,” 6. Aggrieved, the assessee filed appeal before the Ld. CIT(A). During the appellate proceedings, the assessee took the following additional grounds

Three C Universal Developers Pvt. Ltd., New Delhi vs. ACIT, Central Circle- 6, New Delhi

In the result, all the four appeals of the assessee for AYs 2010-11,

ITA 7580/DEL/2018[2011-12]Status: DisposedITAT Delhi01 May 2023AY 2011-12

Bench: Dr. Brr Kumar & Ms. Astha Chandra

For Appellant: NoneFor Respondent: Shri H.K. Chaudhary, CIT-DR
Section 132Section 142(1)Section 153ASection 234A

genuine transaction genuine Thus, it is held that the transaction with the parties (as tabularized below) is non- genuine and not incurred wholly and exclusively for business purpose,” 6. Aggrieved, the assessee filed appeal before the Ld. CIT(A). During the appellate proceedings, the assessee took the following additional grounds

Three C Universal Developers Pvt. Ltd., New Delhi vs. ACIT, Central Circle- 6, New Delhi

In the result, all the four appeals of the assessee for AYs 2010-11,

ITA 7579/DEL/2018[2010-11]Status: DisposedITAT Delhi01 May 2023AY 2010-11

Bench: Dr. Brr Kumar & Ms. Astha Chandra

For Appellant: NoneFor Respondent: Shri H.K. Chaudhary, CIT-DR
Section 132Section 142(1)Section 153ASection 234A

genuine transaction genuine Thus, it is held that the transaction with the parties (as tabularized below) is non- genuine and not incurred wholly and exclusively for business purpose,” 6. Aggrieved, the assessee filed appeal before the Ld. CIT(A). During the appellate proceedings, the assessee took the following additional grounds

DCIT 3(3)(2), Mumbai vs. Watermark Financial Consultants Ltd, Mumbai

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

ITA 3041/MUM/2017[2012-13]Status: DisposedITAT Mumbai26 Apr 2023AY 2012-13

Bench: Shri Aby T. Varkey, Jm & Shri Gagan Goyal, Am आयकर अपील सं/ I.T.A. No.3041/Mum/2017 (निर्धारण वर्ा / Assessment Year: 2012-13) Dcit-3(3)(2) बिधम/ M/S. Watermark Financial Room No. 609, 6Th Floor, Consultants Ltd. Vs. Aayakar Bhavan, M. K. 1009 & 1010, Maker Road, Mumbai-400020. Chamber-V, Nariman Point, Mumbai-400021. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aaacw3474H (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri A. K. Tibrewal/Saurabh Gupta Revenue By: Smt. Mahita Nair (Sr. Ar) सुनवाई की तारीख / Date Of Hearing: 21/02/2023 घोषणा की तारीख /Date Of Pronouncement: 26/04/2023 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Revenue Against The Order Of The Ld. Cit(A)-08, Mumbai Dated 28.02.2017 For Ay. 2012-13. 2. The First Ground Of Appeal Of The Revenue Is Against The Action Of The Ld. Cit(A) Deleting The Disallowance Of Rs.79,333/- Made U/S 14A Of The Income Tax Act, 1961 (Hereinafter “The Act”). 3. Brief Facts As Noted By The Ao Are That The Assessee Has Earned Dividend Income Of Rs.384/- & Has Not Made Any Disallowance For Earning The Exempt Income. Therefore, He Applied Rule 8D(2)(Iii) Of The Income Tax Rules, 1962 (Hereinafter “The Rules”) & Computed Disallowance At Rs.79,333/- & Disallowed It. Aggrieved, The Assessee Preferred An Appeal Before The Ld. Cit(A), Who Was Pleased To Delete It. Aggrieved, The Revenue Is Before Us.

For Appellant: Shri A. K. Tibrewal/Saurabh GuptaFor Respondent: Smt. Mahita Nair (Sr. AR)
Section 143(3)Section 14ASection 68

therefore according to the AO, the expenses claimed could not be verified as to whether the assessee has incurred expenditure wholly and exclusively for business purpose. Therefore, he disallowed 100% of the expenses claimed. On appeal of the Ld. CIT(A) has allowed 50% of the same by deleting Rs.92 ... documents to substantiate the same. Therefore, according to the AO he could not verify the claim as to whether it was incurred wholly and exclusively for business purposes. So he disallowed 100% claim of Rs.2,25,130/-. On appeal, the Ld. CIT(A) allowed 50% of claim. This action

ACIT Circle-61(1), New Delhi vs. Remfry & Sagar, New Delhi

ITA 9403/DEL/2019[2016-17]Status: DisposedITAT Delhi19 Apr 2023AY 2016-17

Bench: Sh. N. K. Billaiya & Sh. Anubhav Sharmaassessment Year: 2016-17 Acit Remfry & Sagar Circle - 61(1) Vs 8, Raya Business Centre, New Delhi Nangal Raya, New Delhi-110046 Pan No.Aaefr6753P (Appellant) (Respondent)

Section 37

decision and failed to consider Explanation 1 of Section 37 which explicitly prohibits allowing any expenditure for a purpose which is not wholly and exclusively for business and profession. 4. Whether the Ld. ITAT erred in relying on Hon’ble ITAT decision and not appreciating that Dr. V. Sagar

Roopam Sarees Pvt. Ltd., Surat vs. Income Tax Officer, Ward 2(1)(1), Surat

In the result, ground no.3 raised by the assessee is allowed

ITA 272/SRT/2022[2013-14]Status: DisposedITAT Surat30 Mar 2023AY 2013-14

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकर अपील सं./Ita No.272/Srt/2022 "नधा"रण वष"/Assessment Year: (2013-14) (Physical Hearing) Roopam Sarees Pvt. Ltd., Vs. The Ito, Ward-2(1)(1), Plot No.55, Jay Krishna Mill, Gidc Surat. Pandesara, Surat-395002. (Appellant) (Respondent) "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aabcr9748N

Section 133ASection 143(3)Section 69C

contention of the assessee and held as follows: “….Hence, it cannot be said that whether such entire expenses have been incurred wholly and exclusively for business purpose and possibility of bogus expenses element cannot be ruled out. Therefore, a part of such expenses i.e. 20% is treated as bogus expenses ... total job work expenses of Rs.2,07,85,960/- on the ground that entire expenditure would not have incurred wholly and exclusively for business purpose. In the course of appellate proceedings, it is submitted that in respect of unsigned vouchers found and impounded during the survey, statement of Director

Jai Ambey Wines, Ajmer vs. ITO, WD1(2), Ajmer

In the result, the appeal of the assessee is allowed

ITA 328/JPR/2022[2016-17]Status: DisposedITAT Jaipur15 Feb 2023AY 2016-17

Bench: Hon’ble SHRI SANDEEP GOSAIN (Judicial Member)

For Appellant: Shri Sunil Porwal, CAFor Respondent: Smt. Monish Choudhary, JCIT-DR
Section 37(1)

prayed to delete the addition..’’ As per provisions of Section 37(1) expenses are allowed only when the same incurred wholly and exclusively for business purposes. Considering the facts, the capital of firm on which no interest is paid is considered for giving interest free advances. However, other interest free

Thrivei Earthmovers Pvt. Ltd., Salem vs. ACIT, Central Circle (I/C), Salem

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

ITA 674/CHNY/2020[2013-14]Status: DisposedITAT Chennai23 Dec 2022AY 2013-14
For Appellant: Shri T. Banusekar, CAFor Respondent: Shri R. Mohan Reddy, CIT
Section 142(1)Section 143(3)Section 147Section 263

necessity of expenditure irrespective of the fact whether expenditure has resulted in profit or more income, as long as payment was made wholly and exclusively for business purpose, the same should be allowed as deduction. From the material on record, it can inferred that expenditure was incurred voluntarily indirectly

Saigal Seatrade, Mumbai vs. Asst CIT 21 (3), Mumbai

Appeal is partly allowed

ITA 7404/MUM/2019[2014-15]Status: DisposedITAT Mumbai22 Dec 2022AY 2014-15
For Appellant: Shri Jitendra JainFor Respondent: Ms. Samruddhi Hande
Section 143(3)Section 14ASection 36(1)(iii)Section 37Section 40

supported by the documentary evidences. In the facts and circumstances of the case, the Appellant submits that the above expenses are incurred wholly and exclusively for business purposes; hence, the disallowance thereof made by the AO shall be deleted. 2.(a) The CIT(A) erred in confirming the action

M/S Ravi Developments, Mumbai vs. ACIT, Central Circle-2, Mumbai

In the result, In ITA No. 764/Mum/2022 in ground nos

ITA 766/MUM/2022[2011-12]Status: DisposedITAT Mumbai28 Nov 2022AY 2011-12

Bench: Shri Aby T. Varkey, Hon'Ble & Shri S. Rifaur Rahman, Hon'Blem/S. Ravi Developments Acit –Central Circle – 2 V. Ashar I.T. Park, 6Th Floor 76, Laxmi Palace, Mathurdas Road Kandivali (W), Mumbai - 400067 Road No. 16Z Wagle Industrial Estate Pan: Aaafr2516G Thane, Mumbai - 400604 Appellant Respondent

Section 40A(3)

aggregating Rs.6,58,000/- on the reasoning that the same is not incurred for the purpose of business whereas the same were wholly and exclusively for business purposes. 3. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in upholding the action

Petronet Mhb Limited, Bangalore vs. The Income Tax Officer, Ward-5(1)(3), Bangalore

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

ITA 789/BANG/2022[2013-14]Status: DisposedITAT Bangalore28 Nov 2022AY 2013-14

Bench: Shri George George K. & Shri Laxmi Prasad Sahuassessment Year : 2013-14

For Appellant: Shri M.G Vinay Simha, C.AFor Respondent: Shri K.R Narayana, Addl. CIT (DR)
Section 143(3)Section 154Section 37(1)

rejected the submissions of the assessee and disallowed the expenditure u/s. 37 by stating that the same is not incurred wholly and exclusively for business purposes. 48. The CIT(Appeals) confirmed the disallowance. 49. Before us, the ld. AR reiterated the submissions made before the lower authorities. Further, he submitted

M/S. Embassy Property Developments Private Limited, Bangalore vs. The Principal Commissioner of Income-Tax, (Central), Bangalore

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

ITA 445/BANG/2022[2017-18]Status: DisposedITAT Bangalore21 Nov 2022AY 2017-18
For Appellant: Shri Sriram Seshadri, CAFor Respondent: Ms. Neera Malhotra, CIT-DR
Section 147Section 17Section 2(22)(e)Section 263Section 37

However, during assessment proceedings, it was not 5 M/s. Embassy Property Developments Pvt. Ltd. verified that whether these expenses were wholly and exclusively for business and whether tax had been deducted on the same.” 4) The assessee made a detailed submission before the PCIT challenging the revision proceedings given that

Sadanand Kashinath Jethe, Mumbai vs. Income Tax Officer -Ward-32(3)(3), Mumbai

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

ITA 1319/MUM/2022[2011-2012]Status: DisposedITAT Mumbai16 Nov 2022AY 2011-2012

Bench: Shri Vikas Awasthy () & Shri Amarjit Singh ()

Section 143(3)Section 148

being 25% of construction expenses attributable to Assessee without appreciating that the construction expenses incurred by the Assessee were incurred wholly and exclusively for business and were reasonable and hence the addition of Rs 34,89,200/- may be deleted. 2.1) Without prejudice to ground No 2, the Learned NFAC

ITO-33(1)(2), Mumbai vs. Shri Vikram Baijnath Agarwal, Mumbai

In the result, appeal filed by the revenue is partly allowed and cross objection filed by the assessee is dismissed

ITA 103/MUM/2021[2014-15]Status: DisposedITAT Mumbai07 Nov 2022AY 2014-15

Bench: Shri Vikas Awasthy, Hon'Ble & Shri S. Rifaur Rahman, Hon'Bleincome Tax Officer – 33(1)(2) V. Shri Vikrambaijnath Agarwal Room No. 945, 9Th Floor 2003/04, Birchwood Raheja Villows Kautilya Bhavan, Bandra Kurla Complex Lokhandwala Township Nr Mahindra Gate 4 Kandivali (E), Mumbai - 400101 Bandra(E), Mumbai - 400051 Pan: Adepa8582C Appellant Respondent

Section 142Section 143(1)Section 143(2)

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY, HON'BLE JUDICIAL MEMBER AND SHRI S

M/S Vrushal Trading Pvt Ltd., Mumbai vs. ITO 11 (3)(3), Mumbai

In the result, the present appeal is partly allowed

ITA 7937/MUM/2019[2012-13]Status: DisposedITAT Mumbai17 Oct 2022AY 2012-13
For Appellant: Shri Rajen DamaniFor Respondent: Ms. Vranda U Matkarni
Section 143(3)Section 14ASection 37

deduction under the head business income. In our opinion, only those expenditure could be allowed to the assessee which were incurred wholly and exclusively for business purposes of the assessee. The plea, as raised by Ld. AR, that the director‟s remuneration has been offered to tax by the director

Keystone Realtors Private Limited, Mumbai vs. Deputy Commissioner of Income Tax - Central Circle 2(4), Mumbai

In the result, appeal filed by the assessee is dismissed

ITA 951/MUM/2018[2007-08]Status: DisposedITAT Mumbai17 Oct 2022AY 2007-08

Bench: Shri Aby T Varkey & Shri Gagan Goyal

For Appellant: Sh. Naresh KumarFor Respondent: Sh. Anil. S. Sant, Sr.DR
Section 115JSection 132(1)Section 143Section 143(3)Section 148Section 153A

mind of AO that payment to Shri Jitendra Awhad/M/s. Jitnat Infrastructure Pvt. Ltd. is not allowable u/s. 37 as it is not wholly and exclusively for business propose and needs to be disallowed. Satisfaction Note of AO is Elaborate, and all facts related are discussed. The satisfaction note is consisting

Nayara Energy Limited (on Behalf of Merged Entity Vadinar Oil Terminal Limited), Mumbai vs. Asstt. Commissioner of Income -Tax Central Circle 2(1), Mumbai

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

ITA 777/MUM/2022[2016-17]Status: DisposedITAT Mumbai10 Oct 2022AY 2016-17

Bench: Shri Pramod Kumar, Vp & Shri Aby T. Varkey, Jm आयकर अपील सं/ I.T.A. No.777/Mum/2022 (निर्धारण वर्ा / Assessment Year: 2016-17) Nayara Energy Ltd (On Acit, Central Circle-2(1) बिधम/ Behalf Of Merged Entity Room No. 804, Pratishtha Vs. Vadinar Oil Terminal Ltd) Bhavan, Old Cgo 5Th Floor, Jet Airways Annexe, M. K. Road, Godrej Bkc, G- Block, Plot Mumbai-400020. C-68, Bkc, Bandra (E), Mumbai-400051. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aabcv2626D (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: Shri Nitesh Joshi Revenue By: Dr. Mahesh Akhade (Dr) सुनवाई की तारीख / Date Of Hearing: 25/08/2022 घोषणा की तारीख /Date Of Pronouncement: 10/10/2022 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By Assessee Against The Order Of The Ld. Commissioner Of Income Tax (Appeals)-48, Mumbai Dated 24.02.2022 For Assessment Year 2016-17. 2. The Grounds Of Appeal Preferred By Assessee Are As Under: - “Disallowance Of Interest Under Section 36(1) (Iii) Of The Income-Tax Act The Act - Rs.149.80 Crores 1. The Learned Assessing Officer (Ao) & Learned Cit(A) Erred In Disallowing Interest Of Rs.149.80 Crores Pertaining To Loans Of Rs.1253.53 Crores Granted To Related Parties Contending Them To Be Interest Free Without Appreciating The Fact, That Out Of The Total Amount, Only Security Deposits Of Rs.96.53 Crores Are Interest Free Refundable

For Appellant: Shri Nitesh JoshiFor Respondent: Dr. Mahesh Akhade (DR)
Section 14ASection 36(1)Section 37

erred in disregarding the explanation made during the course of assessment proceedings that these are actual business expenditure incurred wholly and exclusively for business purpose, and since neither the appellant nor the receiving entity of O & M expenses claim any tax holiday, the transaction under reference is tax neutral

M/S. India Medtronics Pvt.Ltd., Baroda vs. The Dy.CIT., Circle-1(2), Baroda

In the result, similarly the Assessee’s appeal is partly allowed

ITA 480/AHD/2011[2005-06]Status: DisposedITAT Mumbai30 Sept 2022AY 2005-06

Bench: Shri Amit Shukla & Shri Gagan Goyal

For Appellant: Sh. Rajan R. Vora with Sh. Nikhil TiwariFor Respondent: Dr. Yogesh Kamath/ Akhtar Hussain Ansari
Section 234BSection 271Section 274Section 92C

festival, birthday celebrations, Diwali, marrage gifts, etc. ensures cordial employer- employee relationship, though the entire amount cannot be said to be incurred wholly and exclusively for business purpose. The Department has not filed an appeal against the relief granted by the CIT(A) of INR 80,000. Since the expenditure

M/S Bosch Limited, Bangalore vs. Assistant Commissioner of Income Tax Ltu Circle-1, Bangalore

In the result, appeal of the assessee is partly allowed

ITA 1629/BANG/2018[2013-14]Status: DisposedITAT Bangalore13 Sept 2022AY 2013-14

Bench: Shri N.V. Vasudevan & Ms. Padmavathy Sassessment Year : 2013-14 Bosch Limited, Vs. The Assistant Commissioner Hosur Road, Adugodi, Of Income Tax, Ltu, Bangalore – 560 030. Circle 1, Pan: Aaacm 9840P Bangalore. Appellant Respondent Appellant By : Shri Percy Pardiwala, Advocate Respondent By : Shri V S Chakrapani, Cit(Dr)(Itat), Bengaluru. Date Of Hearing : 01.09.2022 Date Of Pronouncement : 13.09.2022 O R D E R Per Padmavathy S.2. This Appeal Is Against The Order Of The Cit(Appeals), Bangalore-9, Bangalore Dated 31.3.2018 For The Assessment Year 2013- 14. 3. The Assessee Raised Grounds Pertaining To The Following Issues:- Deduction U/S. 35(2Ab) Computed On Net Expenditure As Opposed To Gross Expenditure Disallowance Of Provision For Bad & Doubtful Debts I) Disallowance Of Provision For Long Term Service Award Disallowance Of Expenditure U/S. 14A Of The Act Ii) Page 2 Of 67

For Appellant: Shri Percy Pardiwala, AdvocateFor Respondent: Shri V S Chakrapani, CIT(DR)(ITAT), Bengaluru
Section 14ASection 35Section 37Section 43BSection 80J

rejected the submissions of the assessee and disallowed the expenditure u/s. 37 by stating that the same is not incurred wholly and exclusively for business purposes. 48. The CIT(Appeals) confirmed the disallowance. 49. Before us, the ld. AR reiterated the submissions made before the lower authorities. Further, he submitted