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“proximate nexus”

Judicial DoctrinesReopening / 147Reopening / 147134 judgments

The decision most relied on for proximate nexus is PCIT v. M/s. Kesoram Industries 57 (417 ITR 334), cited in 96 judgments on BharatTax.

Leading authorities on proximate nexus

PCIT v. M/s. Kesoram Industries 57
417 ITR 334 · 2019 · High Court
96
citing judgments

The Assessing Officer must establish a proximate nexus between the expenditure to be disallowed and the investments made. The Assessing Officer must record satisfaction before making disallowance under Section 14A and must not proceed on mere suspicion.

CIT v. Samtel Color Ltd.
326 ITR 425 · 2010 · High Court
63
citing judgments

Corporate club membership fees, including admission and subscription fees, incurred wholly and exclusively for business purposes to improve business relations and prospects, are allowable as revenue expenditure. This principle applies when there is a proximate nexus between the expenditure and the business.

CIT v. RPG Transmissions Ltd.
48 Taxmann.com 57 · 2014 · High Court
56
citing judgments

Interest expenditure under Section 36(1)(iii) is deductible for borrowed funds invested for business purposes, even if the investment does not immediately generate income, provided there is a proximate nexus to the assessee's business.

Ramchandar Shivnarayan v. CIT
111 ITR 263 · 1978 · Supreme Court
48
citing judgments

A business loss is deductible if it has a direct and proximate nexus with business operations or is incidental to them, applying a commercial standard, even without an explicit statutory provision for its deduction.

CIT v. Textool Co. Ltd.
135 ITR 200 · 1982 · High Court
48
citing judgments

A loss is deductible as a business loss only if it arises during the course of or is incidental to business operations, requiring a direct and proximate nexus with the business. If profits from an activity are taxable, losses from it are deductible.

PCIT v. Hindusthan Aeronautics Ltd.
143 Taxmann.com 357 · 2022 · High Court
43
citing judgments

The Assessing Officer must establish a proximate nexus between the expenditure and the investments before invoking Section 14A(2) and Rule 8D for disallowance. Failure to do so renders the invocation illegal and the addition liable for deletion.

Seth R. Dalmia v. CIT
110 ITR 644 · 1977 · Supreme Court
40
citing judgments

An indirect connection between expenditure and income can be sufficient to establish the required nexus for deductibility under Section 57(iii). The connection need not be direct.

CITVs T.S. HajeeMoosa& Co. (Mad) 153 ITR 422; Mysore Kirloskar Ltd. v. CIT(Kar)
122 ITR 839 · 1980 · High Court
28
citing judgments

Expenditure must be solely for promoting business to qualify for deduction under Section 37. The assessee bears the burden to prove expenses were incurred wholly and exclusively for business purposes.

Judgments citing proximate nexus

Maruti Suzuki India Ltd., New Delhi vs. DCIT, New Delhi

In the result, the appeal of the Revenue in ITA No

ITA 961/DEL/2015[2010-11]Status: DisposedITAT Delhi09 Feb 2023AY 2010-11

Bench: Shri Shamim Yahya & Shri Kul Bharat[Assessment Year : 2010-11] Maruti Suzuki India Ltd., Vs Dcit, Plot No.1, Nelson Mandela Road, Circle-16(1), Vasant Kunj, New Delhi-110070. New Delhi. Pan-Aaacm0829Q Appellant Respondent [Assessment Year : 2010-11] Dcit, Vs Maruti Suzuki India Ltd., Circle-16(1), Plot No.1, Nelson Mandela Road, New Delhi. Vasant Kunj, New Delhi-110070. Pan-Aaacm0829Q Appellant Respondent Appellant By Shri Ajay Vohra, Sr.Adv., Shri Neeraj Jain, Adv. & Ms. Tejasvi Jain & Ms. Somya Jain, Ca Respondent By Shri G.C.Srivastava, Adv., Shri Kalrav Mehrotra, Adv. & Shri Mayank Patawari, Ca Date Of Hearing 11.11.2022 Date Of Pronouncement 09.02.2023

Section 143(3)Section 144CSection 144C(5)Section 43Section 43B

were not satisfied. 5.2 That the Assessing Officer erred on facts and in law in not appreciating that there was no proximate nexus between any expenditure incurred and exempt dividend income. 5.3 That the Assessing Officer erred on facts and in law in holding that suo-motu disallowance ... deduction under the provision of the Act. The phrase “expenditure incurred” used in the aforesaid section refers to actual expenditure, which has proximate nexus with exempt income, and not some imaginary or notional expenses, for the purposes of disallowance under this section. The provisions of section

DCIT, New Delhi vs. M/S. Maruti Suzuki India Ltd., New Delhi

In the result, the appeal of the Revenue in ITA No

ITA 1507/DEL/2015[2010-11]Status: DisposedITAT Delhi09 Feb 2023AY 2010-11

Bench: Shri Shamim Yahya & Shri Kul Bharat[Assessment Year : 2010-11] Maruti Suzuki India Ltd., Vs Dcit, Plot No.1, Nelson Mandela Road, Circle-16(1), Vasant Kunj, New Delhi-110070. New Delhi. Pan-Aaacm0829Q Appellant Respondent [Assessment Year : 2010-11] Dcit, Vs Maruti Suzuki India Ltd., Circle-16(1), Plot No.1, Nelson Mandela Road, New Delhi. Vasant Kunj, New Delhi-110070. Pan-Aaacm0829Q Appellant Respondent Appellant By Shri Ajay Vohra, Sr.Adv., Shri Neeraj Jain, Adv. & Ms. Tejasvi Jain & Ms. Somya Jain, Ca Respondent By Shri G.C.Srivastava, Adv., Shri Kalrav Mehrotra, Adv. & Shri Mayank Patawari, Ca Date Of Hearing 11.11.2022 Date Of Pronouncement 09.02.2023

Section 143(3)Section 144CSection 144C(5)Section 43Section 43B

were not satisfied. 5.2 That the Assessing Officer erred on facts and in law in not appreciating that there was no proximate nexus between any expenditure incurred and exempt dividend income. 5.3 That the Assessing Officer erred on facts and in law in holding that suo-motu disallowance ... deduction under the provision of the Act. The phrase “expenditure incurred” used in the aforesaid section refers to actual expenditure, which has proximate nexus with exempt income, and not some imaginary or notional expenses, for the purposes of disallowance under this section. The provisions of section