“prohibited by law”

Business ExpensesSection 37 ExplanationSection 37 Explanation498 judgments

The decision most relied on for prohibited by law is Apex Laboratories Pvt. Ltd. v. CIT (135 Taxmann.com 286), cited in 148 judgments on BharatTax.

Leading authorities on prohibited by law

Apex Laboratories Pvt. Ltd. v. CIT

135 Taxmann.com 286 · 2022 · Supreme Court

148

citing judgments

Expenditure incurred by pharmaceutical companies on freebies provided to medical practitioners is not deductible under Explanation 1 to Section 37(1) of the Income-tax Act, as such gifting is prohibited by the Medical Council Regulations, 2002. The court also held that what is directly prohibited by law cannot be indirectly evaded through contrivance.

Sanjeev Woolen Mills v. CIT

279 ITR 434 · 2005 · Supreme Court

citing judgments

The assessee must consistently follow one method of accounting and cannot arbitrarily change it, particularly in contravention of Section 145 of the Income Tax Act. This principle prohibits changes in accounting methods that are not in conformity with the law.

Maddi Venkataraman & Co. (P.) Ltd. v. CIT

229 ITR 534 · 1998 · Supreme Court

citing judgments

Expenditure incurred for a purpose prohibited by law or in violation of another statute is not deductible as business expenditure under Section 37(1) as it is against public policy. The Explanation to Section 37 reinforces that such expenditure is deemed not for business.

Haji Aziz & Abdul Shakoor Bros. v. CIT

41 ITR 350 · 1961 · Supreme Court

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.

CIT v. Kap Scan and Diagnostic Centre (P.) Ltd.

344 ITR 476 · 2012 · High Court

citing judgments

Payment of commission to doctors for referring patients to diagnostic centers or providing gifts, freebies, or hospitality to medical practitioners by pharmaceutical companies is against public policy and cannot be allowed as a business expenditure under Section 37(1). Demanding such benefits is unethical on the part of doctors, and paying them is equally unethical on the part of companies.

Claggett Bronchi Co. Ltd. v. CIT

177 ITR 409 · 1989 · Supreme Court

citing judgments

Issuing a notice under section 148 after two years from the end of the relevant assessment year is prohibited by law and makes reassessment proceedings void.

PCIT v. Monnet Ispat & Energy Ltd.

18 SCC 789 · 2018 · Reported

citing judgments

The Insolvency and Bankruptcy Code (IBC) overrides other laws, including the Income Tax Act, due to its non-obstante clause in Section 238. Proceedings initiated against a corporate debtor undergoing insolvency are prohibited under Section 14 of the IBC.

Confederation of Indian Pharmaceutical Industry (SSI) v. CBDT

353 ITR 388 · 2013 · High Court

citing judgments

Payments made to doctors in violation of Indian Medical Council regulations are considered opposed to public policy and are not deductible as business expenditure under section 37(1). Such payments are to be discouraged.

Judgments citing prohibited by law

Union Bank of India, Mumbai vs. DCIT, Cir - (Ltu)-2, Mumbai

ITA 1440/MUM/2023[2016-17]Status: DisposedITAT Mumbai27 Sept 2024AY 2016-17

Bench: Shri Anikesh Banerjee, Jm & Shri Ms Padmavathy S, Am, Ι.Τ.Α. No.1440/Mum/2023 (Assessment Year: 2016-17) M/S Union Bank Of India, Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai-400021 Pan : Aaacu0564G Dcit, Circle-(Ltu) 2 29Th Floor, World Trade Centre, Vs. Cuffe Parade, Mumbai-400005. Appellant) : Respondent) Ι.Τ.Α. No.1819/Mum/2023 (Assessment Year: 2016-17) Dcit-3(4) 29Th Floor, Centre-1, World Trade Centre, Cuffe Parade, Mumbai-400005. Vs. M/S Union Bank Of India, Central Accounts Dept., 6Th Floor, Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai-400021 Pan : Aaacu0564G Appellant) : Respondent) Ι.Τ.Α. No.1441/Mum/2023 (Assessment Year: 2017-18) M/S Union Bank Of India, Union Bank Bhavan, 239, Vidhan Bhavan Marg, Nariman Point, Mumbai-400021 Pan : Aaacu0564G Dcit, Circle-(Ltu) 1 29Th Floor, World Trade Centre, Vs. Cuffe Parade, Mumbai-400005. Appellant) : Respondent) 2

For Appellant: Shri C. Naresh, ARFor Respondent: Shri Vivek Perampurna, CIT-DR

Section 115JSection 144Section 14ASection 36(1)(viii)

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JM & SHRI MS PADMAVATHY S, AM, Ι

Siddhayu Aaurvedic Research Foundation Pvt. Ltd, Mumbai vs. Addl/Jt/ACIT/ITO/NFAC/// the ACIT Circle 34(3) (2), Delhi

In the result this appeal is dismissed with costs

ITA 745/MUM/2022[2017-18]Status: DisposedITAT Mumbai24 Sept 2024AY 2017-18

Bench: Shri Anikesh Banerjee & Shri Gagan Goyalsiddhayu Aayurvedic Research Foundation Pvt. Ltd., C/704, Pramukh Plaza, Cardinal Gracious Road, Chakala, Andheri East, Mumbai-400 069. Pan No. Aaacs8335F ..... Appellant Vs. Acit Circle 4(3) (2) Aaykar Bhavan, M. K. Road, Mumbai-400 020. ..... Respondent

For Appellant: Shri Satyaprakash Singh, Ld. ARFor Respondent: Shri K. C. Selvamani, Ld. DR

Section 143(2)Section 143(3)Section 144CSection 234BSection 270ASection 271ASection 28Section 37(1)

doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect ... removal of doubts, it is hereby clarified that the expression "expenditure incurred by an assessee which is an offence or which is prohibited by law" under Explanation 1, shall include and shall be deemed to have always included the expenditure incurred by an assessee,— (i) for any purpose which

Paradise Infrastructure, Jaipur vs. Assistant Commissioner of Income Tax, Circle-1, Jaipur

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

ITA 871/JPR/2024[2017-18]Status: DisposedITAT Jaipur19 Sept 2024AY 2017-18

Bench: The Learned Ao.

For Appellant: Shri S.L. Poddar (Adv.)For Respondent: Shri Anup Singh (Addl. CIT)

Section 142(1)Section 143(2)Section 143(3)Section 40

ACIT, Circle 1(1), Chandigarh vs. M/S Sml Isuzu Ltd., Chandigarh

ITA 644/CHANDI/2022[2015-16]Status: DisposedITAT Chandigarh18 Sept 2024AY 2015-16

Bench: SHRI. VIKRAM SINGH YADAV (Accountant Member), SHRI. PARESH M. JOSHI (Judicial Member)

For Appellant: Shri Rohit Jain, Advocate and Ms. Somya Jain, C.AFor Respondent: Shri Vivek Vardhan, JCIT, Sr. DR

Section 143(2)Section 143(3)Section 147Section 148Section 250Section 253Section 3

review is not expressly conferred by the statute on AO. Merely because subsequently after original assessment proceedings are all over, they are prohibited by law under section 147/148 to do reassessment merely because they feel based on existing material there is a need to relook or change of opinion

Fatehpuria Transformers and Switchgears Pvt. Ltd., Jaipur vs. PCIT-1, Jaipur

In the result, appeal of the assessee is allowed

ITA 224/JPR/2024[2018-19]Status: DisposedITAT Jaipur29 Aug 2024AY 2018-19

Bench: DR. S. SEETHALAKSHMI (Judicial Member)

For Appellant: Sh. Sanjeev Kumar Mathur, CAFor Respondent: Sh. Ajay Malik, CIT

Section 143(2)Section 143(3)Section 263Section 80I

doubts, it is hereby declared that any expenditure Incurred by an assessee for any purpose which is an offence or which is prohibited by laws shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect

Prakash Shipping Agencies, Chennai vs. ACIT, Central Circle 3(3), Chennai

In the result, the appeals filed by the assessee in ITA Nos

ITA 537/CHNY/2024[2018-19]Status: DisposedITAT Chennai28 Aug 2024AY 2018-19

Bench: SHRI MAHAVIR SINGH (Vice President), SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Shri Y. Sridhar, F.C.A ""For Respondent: Shri AR.V. Sreenivasan,A ddl.CIT

Section 133ASection 147Section 147oSection 148Section 37(1)Section 69C

section 37(1) of the Act, any expenditure incurred by an assessee for the purpose, which is an offence or which is prohibited by law, shall not be deemed to have been incurred for the purpose of business or profession and hence, no deduction shall be allowed in respect ... reason that no payment is made to government employee or for any purpose which is an offence or which is prohibited by law. The ld.counsel claimed that these expenditures were paid for the purpose mentioned above and from the beginning this was the stand of assessee

Prakash Shipping Agencies, Chennai vs. ACIT, Central Circle 3(3), Chennai

In the result, the appeals filed by the assessee in ITA Nos

ITA 535/CHNY/2024[2016-17]Status: DisposedITAT Chennai28 Aug 2024AY 2016-17

Bench: SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Shri Y. Sridhar, F.C.A ""For Respondent: Shri AR.V. Sreenivasan,A ddl.CIT

Section 133ASection 147Section 147oSection 148Section 37(1)Section 69C

Prakash Shipping Agencies, Chennai vs. ACIT, Central Circle-3(3), Chennai

In the result, the appeals filed by the assessee in ITA Nos

ITA 534/CHNY/2024[2015-16]Status: DisposedITAT Chennai28 Aug 2024AY 2015-16

Bench: SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Shri Y. Sridhar, F.C.A ""For Respondent: Shri AR.V. Sreenivasan,A ddl.CIT

Section 133ASection 147Section 147oSection 148Section 37(1)Section 69C

Prakash Shipping Agencies, Chennai vs. ACIT, Central Circle-3(3), Chennai

In the result, the appeals filed by the assessee in ITA Nos

ITA 533/CHNY/2024[2014-15]Status: DisposedITAT Chennai28 Aug 2024AY 2014-15

Bench: SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Shri Y. Sridhar, F.C.A ""For Respondent: Shri AR.V. Sreenivasan,A ddl.CIT

Section 133ASection 147Section 147oSection 148Section 37(1)Section 69C

Prakash Shipping Agencies, Chennai vs. ACIT, Central Circle 3(3), Chennai

In the result, the appeals filed by the assessee in ITA Nos

ITA 532/CHNY/2024[2013-14]Status: DisposedITAT Chennai28 Aug 2024AY 2013-14

Bench: SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Shri Y. Sridhar, F.C.A ""For Respondent: Shri AR.V. Sreenivasan,A ddl.CIT

Section 133ASection 147Section 147oSection 148Section 37(1)Section 69C

Shri Rampriya Developers Private Limited, Hyderabad vs. Deputy Commissioner of Incometax, Circle-3(1), Hyderabad

In the result, appeal filed by the assessee is dismissed

ITA 1946/HYD/2017[1999-2000]Status: DisposedITAT Hyderabad14 Aug 2024AY 1999-2000

Bench: Shri Laliet Kumar & Shri Manjunatha, G.आ.अपी.सं /Ita No.1946/Hyd/2017 (िनधा"रण वष"/Assessment Year: 1999-2000) Shri Rampriya Developers Vs. Dy. C. I. T. (P) Ltd Circle 3(1) Hyderabad Hyderabad Pan:Aajcs6629P (Appellant) (Respondent) िनधा""रती "ारा/Assessee By: Shri A.V. Raghuram, Advocate राज" व "ारा/Revenue By:: Shri Shakeer Ahmed, Dr सुनवाई की तारीख/Date Of Hearing: 09/07/2024 घोषणा की तारीख/Pronouncement: 14/08/2024 आदेश/Order

For Appellant: Shri A.V. Raghuram, AdvocateFor Respondent: : Shri Shakeer Ahmed, DR

Section 143(3)Section 14A

Rajmadhan Jagadeesan, Madurai vs. ITO, Ncw 1(7), Madurai

In the result, appeal filed by the assessee is allowed

ITA 1273/CHNY/2024[2017-18]Status: DisposedITAT Chennai14 Aug 2024AY 2017-18

Bench: Shri Manu Kumar Giri, Hon’Ble & Shri S. R. Raghunatha, Hon’Bleआयकरअपीलसं./Ita No.: 1273/Chny/2024 िनधा"रणवष" / Assessment Year: 2017-18 Rajmadhan Jagadeesan, The Income Tax Officer, 4-8/31, Plot No. 60, V. Non-Corporate Ward -1(7), 1St Main Road, Madurai. P & T Nagar, Madurai – 625 017. [Pan: Atopr-5753-Q] (अपीलाथ"/Appellant) (""यथ"/Respondent) अपीलाथ"क"ओरसे/Appellant By : Shri. Kathir, Advocate : Shri. Ar V Sreenivasan, Addl. Cit ""यथ"क"ओरसे/Respondent By सुनवाई क" तारीख/Date Of Hearing : 16.07.2024 घोषणा क" तारीख/Date Of Pronouncement : 14.08.2024 आदेश /O R D E R Per S. R. Raghunatha:

For Appellant: Shri. Kathir, Advocate

Section 143(2)Section 69A

deposit was the recovery from the debtors and sale of tobacco products during the demonetisation period. The AO held that the appellant was prohibited by law from accepting demonetised currency after demonetisation was announced and hence, the demonetised currency deposited by the appellant over and above the cash in hand ... deposit was the recovery from the debtors and sale of tobacco products during the demonetisation period. The AO held that the appellant was prohibited by law from accepting demonetised currency after demonetisation was announced and hence, the demonetised currency deposited by the appellant over and above the cash in hand

Chalasani Hospitals Pvt Ltd, Visakhapatnam vs. Assistant Commissioner of Income Tax, Circle-1(1), Visakhapatnam

In the result, appeal of the assessee is dismissed and the cross objection of the revenue is allowed

ITA 315/VIZ/2023[2018-19]Status: DisposedITAT Visakhapatnam12 Aug 2024AY 2018-19

Bench: Shri Duvvuru Rl Reddy, Hon’Ble & Shri S Balakrishnan, Hon’Bleआयकर अपील सं./I.T.A.No.315/Viz/2023 (निर्धारण वर्ा/ Assessment Year: 2018-19) Chalasani Hospitals (P.) Ltd., V. Asst. Commissioner Of Income Tax Central Circle – 1(1) D.No. 50-53-14, Gurudwara Lane Income Tax Office Seethammadhara Direct Taxes Building Visakhapatnam – 530013 Mvp Colony, Visakhapatnam -530017 Andhra Pradesh Andhra Pradesh [Pan :Aaecc0005G] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent)

Section 142(1)Section 143(1)Section 143(3)Section 37(1)

advertisement before Ld. CIT(A). Ld.AR further submitted that Remand Report submitted by the Assessing Officer does not discuss about expenses which are prohibited by law. It was submitted by the Ld.AR that the Assessing Officer has observed that the assessee has not produced ledger extract / bills / vouchers

Danayya Shavapurtayya Matha, Vijayapur vs. Assistant Commissioner of Income Tax, Circle-1, Vijayapur

In the result, both the appeals in ITA Nos

ITA 1286/BANG/2024[2014-15]Status: DisposedITAT Bangalore08 Aug 2024AY 2014-15

Bench: Shri Chandra Poojari & Shri Keshav Dubeyassessment Year: 2014-15

For Appellant: Smt. Pratibha R., A.RFor Respondent: Sri V. Parithivel, D.R

Section 142(1)Section 143(2)Section 145

handling were done beyond working hours, such payments were made either through labour or workers’ union. It could not be considered to be prohibited by law. The assessee could not be expected to take receipts from individual workers or make payment by way of cheques. The payment was made

Dasanna Hanumanthappa, Mysore vs. Income Tax Officer, Ward-1(1), Mysore

In the result, appeal of the assessee is partly allowed

ITA 1238/BANG/2024[2018-19]Status: DisposedITAT Bangalore08 Aug 2024AY 2018-19

Bench: Shri Chandra Poojari & Shri Keshav Dubeyassessment Year: 2018-19

For Appellant: Sri Vageesh Hedge, A.RFor Respondent: Sri V. Parithivel, D.R

Section 143(2)Section 143(3)Section 250Section 44A

payments were made either through labour or workers’ union. Dasanna Hanumanthappa, Mysore Page 4 of 4 It could not be considered to be prohibited by law. The assessee could not be expected to take receipts from individual workers or make payment by way of cheques. The payment was made

Sangay Choden Bhutia, New Delhi vs. ITO, Ward 70(2), New Delhi

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

ITA 624/DEL/2023[2018-19]Status: DisposedITAT Delhi24 Jul 2024AY 2018-19

Bench: SHRI S.RIFAUR RAHΜΑΝ (Accountant Member), SHRI ANUBHAV SHARMA (Judicial Member)

Section 143(1)Section 154Section 37(1)

Doctor is against the provisions of Indian Medical Council Regulation Act, 2022 and thereby expenditure incurred for committing offence under an act is prohibited by law. By referring to the provisions of section 37(1) he has dismissed the appeal filed by the assessee. Sangay Choden Bhutia ... being expenditure incurred for advertisement even though the same is incurred for the purpose which is not an offence or prohibited by law, thus the order dismissing the appeal is bad in law and against the law and the facts of the case. 2. The Learned Commissioner (Appeal) erred

Dhandapani Rajasekar, Salem vs. DCIT Circle 1(1), Salem

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

ITA 526/CHNY/2024[2017-18]Status: DisposedITAT Chennai01 Jul 2024AY 2017-18

Bench: SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL (Accountant Member)

For Appellant: Shri T.S. Lakshmi Venkataraman,CAFor Respondent: Shri AR.V. Sreenivasan, Addl.CIT

Section 143(3)Section 250

currency notes from his customers after the demonetization was announced. The acceptance of demonetised notes after the demonetisation was announced was prohibited by law. The AO is directed either to delete or sustain the addition on the basis of the verification to be carried as directed, Ground no.2

Kepler Healthcare Private Limited, Ahmedabad vs. The Pr. CIT-1, Ahmedabad

In the result, the appeal of the assessee is allowed

ITA 565/AHD/2024[2018-19]Status: DisposedITAT Ahmedabad12 Jun 2024AY 2018-19

Bench: Ms. Suchitra R. Kamble & Shri Narendra Prasad Sinhaassessment Year : 2018-19 Kepler Healthcare Private Limited, The Pr. Commissioner Of C/O. M S Chhajed & Co., Ca, Vs Income Tax-1, Ahmedabad “Kamal Shanti, Nr. Sardar Patel Statute, Ahmedabad-380014 Pan : Aafck 1130 R अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri M.S. Chhajed, Ar Revenue By : Shri Kamlesh Makwana, Cit-Dr सुनवाई की तारीख/Date Of Hearing : 30/05/2024 घोषणा की तारीख /Date Of Pronouncement : 12/06/2024

For Appellant: Shri M.S. Chhajed, ARFor Respondent: Shri Kamlesh Makwana, CIT-DR

Section 143(3)Section 263

medical practitioners (including doctors in private practice), was introduced from December 14, 2009. Thus, pharmaceutical companies' gifting freebies to doctors is clearly 'prohibited by law', and not allowed to be claimed as a deduction under Section 37(1) of the Income Tax Act (as business expenditure). Doing so would wholly

Deputy Commissioner of Income Tax Circle-2(1)(1), Bengaluru vs. Canara Bank, Bengaluru

In the result, revenue’s appeal in ITA No

ITA 716/BANG/2024[2015-16]Status: DisposedITAT Bangalore10 Jun 2024AY 2015-16

Bench: Shri Chandra Poojari & Shri Keshav Dubeyassessment Year: 2015-16

For Appellant: Sri S. Ananthan, A.RFor Respondent: Ms. Neera Malhotra, D.R

Section 14Section 147Section 14ASection 154

erred in law by deleting addition of Rs. 2,03,00,000/- made by the A.O. being expenditure prohibited in law, as per Explanation 1 to section37 7. Whether in the facts and circumstances of the case, the ld. CIT(A) is correct in holding that penalties levied under section ... operations of currency chest etc. It is further submitted that levy of penalty by RBI is not due to any offences prohibited by law or for infringing of any statute. It is only an additional burden imposed on the bank branches to provide better customer services to members

Canara Bank, Bengaluru vs. The Deputy Commissioner of Income Tax, Circle-2(1)(1), Bangalore, Bengaluru

In the result, revenue’s appeal in ITA No

ITA 111/BANG/2024[2015-16]Status: DisposedITAT Bangalore10 Jun 2024AY 2015-16

Bench: Shri Chandra Poojari & Shri Keshav Dubeyassessment Year: 2015-16

For Appellant: Sri S. Ananthan, A.RFor Respondent: Ms. Neera Malhotra, D.R

Section 14Section 147Section 14ASection 154