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“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
75
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
72
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
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.

CIT v. Kap Scan and Diagnostic Centre (P.) Ltd.
344 ITR 476 · 2012 · High Court
58
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
38
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
33
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
26
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

Wilfred D'Souza, Mangaluru vs. Assistant Commissioner of Income Tax, Central Circle-2, Mangaluru

In the result, ITA Nos.323 & 324/Bang/2022 are allowed and the appeals filed by the assessee in ITA Nos

ITA 328/BANG/2022[2013-14]Status: DisposedITAT Bangalore07 Oct 2022AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Smt. S. Praveena, D.R
Section 132Section 143Section 153ASection 246A

expenses • Laid out or expended wholly and exclusively for the purpose of the business • Expenses for any purpose which is an offence or prohibited by law not eligible ITA Nos.323 to 328/Bang/2022 Wilfred D’Souza, Mangaluru Page 31 of 41 • Expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet ... angle, it is clear that the expenditure was incurred towards an activity of giving loans to people which, as per RBI guidelines were prohibited by law to be carried out by the assessee. This will need to be viewed in light of explanation to section 37 (1): - “The Explanation added

Wilfred D'Souza, Mangaluru vs. Assistant Commissioner of Income Tax, Central Circle-2, Mangaluru

In the result, ITA Nos.323 & 324/Bang/2022 are allowed and the appeals filed by the assessee in ITA Nos

ITA 327/BANG/2022[2012-13]Status: DisposedITAT Bangalore07 Oct 2022AY 2012-13

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Smt. S. Praveena, D.R
Section 132Section 143Section 153ASection 246A

expenses • Laid out or expended wholly and exclusively for the purpose of the business • Expenses for any purpose which is an offence or prohibited by law not eligible ITA Nos.323 to 328/Bang/2022 Wilfred D’Souza, Mangaluru Page 31 of 41 • Expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet ... angle, it is clear that the expenditure was incurred towards an activity of giving loans to people which, as per RBI guidelines were prohibited by law to be carried out by the assessee. This will need to be viewed in light of explanation to section 37 (1): - “The Explanation added

Wilfred D'Souza, Mangaluru vs. Assistant Commissioner of Income Tax, Central Circle-2, Mangaluru

In the result, ITA Nos.323 & 324/Bang/2022 are allowed and the appeals filed by the assessee in ITA Nos

ITA 326/BANG/2022[2011-12]Status: DisposedITAT Bangalore07 Oct 2022AY 2011-12

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Smt. S. Praveena, D.R
Section 132Section 143Section 153ASection 246A

expenses • Laid out or expended wholly and exclusively for the purpose of the business • Expenses for any purpose which is an offence or prohibited by law not eligible ITA Nos.323 to 328/Bang/2022 Wilfred D’Souza, Mangaluru Page 31 of 41 • Expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet ... angle, it is clear that the expenditure was incurred towards an activity of giving loans to people which, as per RBI guidelines were prohibited by law to be carried out by the assessee. This will need to be viewed in light of explanation to section 37 (1): - “The Explanation added

Wilfred D'Souza, Mangaluru vs. Assistant Commissioner of Income Tax, Central Circle-2, Mangaluru

In the result, ITA Nos.323 & 324/Bang/2022 are allowed and the appeals filed by the assessee in ITA Nos

ITA 325/BANG/2022[2010-11]Status: DisposedITAT Bangalore07 Oct 2022AY 2010-11

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Smt. S. Praveena, D.R
Section 132Section 143Section 153ASection 246A

expenses • Laid out or expended wholly and exclusively for the purpose of the business • Expenses for any purpose which is an offence or prohibited by law not eligible ITA Nos.323 to 328/Bang/2022 Wilfred D’Souza, Mangaluru Page 31 of 41 • Expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet ... angle, it is clear that the expenditure was incurred towards an activity of giving loans to people which, as per RBI guidelines were prohibited by law to be carried out by the assessee. This will need to be viewed in light of explanation to section 37 (1): - “The Explanation added

Wilfred D'Souza, Mangaluru vs. Assistant Commissioner of Income Tax, Central Circle-2, Mangaluru

In the result, ITA Nos.323 & 324/Bang/2022 are allowed and the appeals filed by the assessee in ITA Nos

ITA 324/BANG/2022[2009-10]Status: DisposedITAT Bangalore07 Oct 2022AY 2009-10

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Smt. S. Praveena, D.R
Section 132Section 143Section 153ASection 246A

expenses • Laid out or expended wholly and exclusively for the purpose of the business • Expenses for any purpose which is an offence or prohibited by law not eligible ITA Nos.323 to 328/Bang/2022 Wilfred D’Souza, Mangaluru Page 31 of 41 • Expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet ... angle, it is clear that the expenditure was incurred towards an activity of giving loans to people which, as per RBI guidelines were prohibited by law to be carried out by the assessee. This will need to be viewed in light of explanation to section 37 (1): - “The Explanation added

Wilfred D'Souza, Mangaluru vs. Assistant Commissioner of Income Tax, Central Circle-2, Mangaluru

In the result, ITA Nos.323 & 324/Bang/2022 are allowed and the appeals filed by the assessee in ITA Nos

ITA 323/BANG/2022[2008-09]Status: DisposedITAT Bangalore07 Oct 2022AY 2008-09

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Narendra Sharma, A.RFor Respondent: Smt. S. Praveena, D.R
Section 132Section 143Section 153ASection 246A

expenses • Laid out or expended wholly and exclusively for the purpose of the business • Expenses for any purpose which is an offence or prohibited by law not eligible ITA Nos.323 to 328/Bang/2022 Wilfred D’Souza, Mangaluru Page 31 of 41 • Expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet ... angle, it is clear that the expenditure was incurred towards an activity of giving loans to people which, as per RBI guidelines were prohibited by law to be carried out by the assessee. This will need to be viewed in light of explanation to section 37 (1): - “The Explanation added

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

section denies claim of any such expense, if the same has been incurred for a purpose which is either an offence or prohibited by law. Thus, the claim of any expense incurred in providing above mentioned or similar freebees in violation of the provisions of 30 ITA No.480/Ahd/2011 & ITA No.3361/Ahd/2010 ... order to save its employee’s life. Thus, the assessee was not a wilful participant in commission of an offence or activity prohibited by law. The same is not applicable to the present facts. Pharmaceutical companies have misused a legislative gap to actively perpetuate the commission of an offence

M/S.Lakeside Properties Pvt. Ltd, Mumbai vs. DCIT, Central Circle -1(4), Mumbai

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

ITA 1631/MUM/2022[2017-18]Status: DisposedITAT Mumbai27 Sept 2022AY 2017-18

Bench: Shri Kuldip Singh () & Shri Om Prakash Kant () Assessment Year: 2017-18 M/S Lakeside Properties Private Dcit, Central Circle-1(4), Limited, Room No. 902, 9Th Floor, Old 312/3 Sharda Chamber No. 131, Vs. Cgo Building, M.K. Road, Keshavji Naik Road, Bhat Bazar, Mumbai-400020. Masjid (West), Mumbai-400 009. Pan No. Aabcl 4041 Q Appellant Respondent Assessee By : Mr. Siddharth Kothari, Ar Revenue By : Ms. Shailja Rai, Cit-Dr Date Of Hearing : 25/08/2022 Date Of Pronouncement : 27/09/2022

For Appellant: Mr. Siddharth Kothari, ARFor Respondent: Ms. Shailja Rai, CIT-DR
Section 139Section 37(1)

assessee for any purpose which 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 is an offence or which is prohibited by laws shall not be deemed to is an offence or which ... prohibited by laws shall not be deemed to have been incurred for the purpose of business have been incurred for the purpose of business or profession and no or profession and no deduction or allowance shall be made in respect of such deduction or allowance shall be made in respect

M/S Hassan Hajee & Co., Mangalore vs. Deputy Commissioner of Income Tax Central Circle, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 870/BANG/2017[2013-14]Status: DisposedITAT Bangalore22 Sept 2022AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

M/S Hassan Hajee & Co., Mangalore vs. Deputy Commissioner of Income Tax Central Circle, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 30/BANG/2017[2012-13]Status: DisposedITAT Bangalore22 Sept 2022AY 2012-13

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

Asst.C.I.T., Mangalore vs. M/S Hassan Hajee & Co, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 1363/BANG/2015[2011-12]Status: DisposedITAT Bangalore22 Sept 2022AY 2011-12

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

Asst.C.I.T., Mangalore vs. M/S Hassan Hajee & Co, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 1362/BANG/2015[2010-11]Status: DisposedITAT Bangalore22 Sept 2022AY 2010-11

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

Asst.C.I.T., Mangalore vs. M/S Hassan Hajee & Co, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 1361/BANG/2015[2009-10]Status: DisposedITAT Bangalore22 Sept 2022AY 2009-10

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

Asst.C.I.T., Mangalore vs. M/S Hassan Hajee & Co, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 1360/BANG/2015[2008-09]Status: DisposedITAT Bangalore22 Sept 2022AY 2008-09

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

Asst.C.I.T., Mangalore vs. M/S Hassan Hajee & Co, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 1359/BANG/2015[2007-08]Status: DisposedITAT Bangalore22 Sept 2022AY 2007-08

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

Asst.C.I.T., Mangalore vs. M/S Hassan Hajee & Co, Mangalore

In the result, the assessee’s appeals in ITA Nos

ITA 1358/BANG/2015[2006-07]Status: DisposedITAT Bangalore22 Sept 2022AY 2006-07

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Sri V. Srinivasan, A.RFor Respondent: Sri Praveen Karanth, D.R

handling beyond the working hours are attended. Such payments are made either through labour or workers union cannot be considered to be either prohibited in law and further the assessee cannot be expected to take the receipt from individual workers or make payments by way of cheques. 22. The Bangalore ... cargo handling were done beyond working hours, such payments were made either through labour workers union. It could not be considered to be prohibit 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

DCIT, CC - 1 (2), Chennai vs. M/S. Cholamandalam Ms Risk Services Ltd., Chennai

In the result, the appeal filed by the Revenue is dismissed

ITA 262/CHNY/2020[2015-16]Status: DisposedITAT Chennai16 Sept 2022AY 2015-16

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./I.T.A. No.262/Chny/2020 िनधा"रण वष"/Assessment Year: 2015-16 The Deputy Commissioner Of Vs. M/S. Cholamandalam Ms Risk Services Ltd., No. 02, 2Nd Floor, Income Tax, Corporate Circle 1(2), Chennai 600 034. Dare House, N S C Bose Road, Parrys, Chennai 600 001. [Pan:Aabcc6610Q] (अपीलाथ"/Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By : Shri M. Rajan, Cit ""थ" की ओर से/Respondent By : Shri P. Murali Mohana Rao, Fca सुनवाई की तारीख/ Date Of Hearing : 12.07.2022 घोषणा की तारीख /Date Of Pronouncement : 16.09.2022 आदेश /O R D E R Per V. Durga Rao: This Appeal Filed By The Revenue Is Directed Against The Order Of The Ld. Commissioner Of Income Tax (Appeals) 4 (I/C), Chennai, Dated 26.11.2019 Relevant To The Assessment Year 2015-16. 2. The Assessee Company Is Engaged In The Business Of Providing Risk Assessment Services & Filed Its Return Of Income For The Assessment Year 2015-16 On 25.09.2015 Admitting A Total Income Of ₹.2,39,21,070/-. After Following Due Procedure & Considering The 2

For Appellant: Shri M. Rajan, CITFor Respondent: Shri P. Murali Mohana Rao, FCA
Section 143(3)Section 37Section 37(1)

Chola MS General Insurance Company for the customers referred by the Indus Ind Bank and thereby the assessee’s payments were not prohibited by law. The payment made by the assessee was only for the purpose of carrying its business as per the commercial expediency along with Indus Ind Bank ... required to be commensurate each year from the point of view of commercial expediency and further that appellant's payments were not prohibited by law. 8. Now, whether expenditure is expedient for the purpose of promotion of sales or business and the amount and the manner in which

Gmr Energy Limited, Bengaluru vs. Assistant Director Income Tax, CPC, Bangalore

In the result, both the appeals of the assessee are dismissed

ITA 526/BANG/2022[2020-21]Status: DisposedITAT Bangalore02 Sept 2022AY 2020-21

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Jagdish K. Jogi, A.RFor Respondent: Shri Sumer Singh Meena, D.R
Section 143(1)Section 143(1)(a)

law is well settled that what cannot be done “Per directum” is not permissible to be done “per obliquum”, meaning thereby whatever is prohibited by law to be done, cannot legally be effected by an indirect and circuitous contrivance on the principle of “quando aliquid prohibetur, prohibetur at omne ... settled proposition of law that what cannot be done “per directum is not permissible to be done per obliquum”, meaning thereby whatever is prohibited by law to be done, cannot legally be affected by an indirect and circuitous contrivance on the principle of “qundo aliquid prohibetur, prohibetur at omne

Gmr Energy Limited, Bengaluru vs. Assistant Director of Income Tax, CPC, Bangalore

In the result, both the appeals of the assessee are dismissed

ITA 513/BANG/2022[2019-20]Status: DisposedITAT Bangalore02 Sept 2022AY 2019-20

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Appellant: Shri Jagdish K. Jogi, A.RFor Respondent: Shri Sumer Singh Meena, D.R
Section 143(1)Section 143(1)(a)

law is well settled that what cannot be done “Per directum” is not permissible to be done “per obliquum”, meaning thereby whatever is prohibited by law to be done, cannot legally be effected by an indirect and circuitous contrivance on the principle of “quando aliquid prohibetur, prohibetur at omne ... settled proposition of law that what cannot be done “per directum is not permissible to be done per obliquum”, meaning thereby whatever is prohibited by law to be done, cannot legally be affected by an indirect and circuitous contrivance on the principle of “qundo aliquid prohibetur, prohibetur at omne

M/S. Jsw Cement Ltd, Mumbai vs. Addl /CIT/Dy/ACIT/Income Tax, Mumbai

In the result, subject to the observations made/ directions given above, the appeal of the assessee is treated as allowed for statistical purposes

ITA 241/MUM/2022[2018-19]Status: DisposedITAT Mumbai12 Aug 2022AY 2018-19

Bench: Sri Sanjay Garg & Sri Om Prakash Kant

Section 139(1)Section 2(24)(x)Section 250Section 36(1)(va)Section 37Section 43B

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 or allowance shall be made