Section 37(1) of the Income Tax Act

The decision most relied on for Section 37(1) is CIT v. Reliance Utilities & Power Ltd. (313 ITR 340), cited in 2,118 of the 6,995 judgments on BharatTax that turn on this section.

Leading authorities on Section 37(1)

CIT v. Reliance Utilities & Power Ltd.
313 ITR 340 · 2009 · High Court
2,118
citing judgments

Where an assessee claims that investments were made out of own funds, interest disallowance under Section 14A read with Rule 8D may not apply if the assessee demonstrates the availability of sufficient interest-free funds to cover such investments.

Goetze (India) Ltd. v. CIT
284 ITR 323 · 2006 · Supreme Court
1,842
citing judgments

An assessee cannot raise a new claim or a claim not made in the original or revised return of income for the first time directly before the Assessing Officer during assessment proceedings.

Radhasoami Satsang v. CIT
193 ITR 321 · 1992 · Supreme Court
1,695
citing judgments

The principle of consistency applies in tax matters, meaning a fundamental aspect found to be true in one assessment year should not be changed in a subsequent year if the order was not challenged.

Maxopp Investment Ltd. v. CIT
402 ITR 640 · 2018 · Supreme Court
1,596
citing judgments

Disallowance under Section 14A is not automatic and requires the Assessing Officer to record satisfaction before applying Rule 8D. Only investments yielding exempt income are considered for disallowance, irrespective of their strategic nature.

Cheminvest Ltd. v. CIT
378 ITR 33 · 2015 · High Court
1,569
citing judgments

A disallowance under Section 14A of the Income-tax Act, 1961, for expenditure incurred in relation to exempt income cannot be made if the assessee has not earned any exempt income during the relevant previous year.

Checkmate Services Pvt. Ltd. v. CIT
143 Taxmann.com 178 · 2022 · Supreme Court
1,392
citing judgments

Employee contributions to provident fund and ESI deposited by an employer beyond the due dates prescribed under the respective special Acts are not allowable as a deduction under section 36(1)(va) of the Income-tax Act, 1961. Such disallowance can be made during processing under section 143(1).

CIT v. HDFC Bank Ltd.
366 ITR 505 · 2014 · High Court
1,261
citing judgments

When an assessee possesses interest-free funds sufficient to cover investments yielding tax-free income, it is presumed that such investments were made from these interest-free funds, precluding disallowance of interest expenditure under Section 14A.

Godrej & Boyce Mfg. Co. Ltd. v. DCIT
328 ITR 81 · 2010 · High Court
1,183
citing judgments

Rule 8D, for computing disallowance under Section 14A for expenses related to exempt income, applies from Assessment Year 2008-09 onwards; for prior years, a reasonable disallowance must be made. The disallowance under Section 14A cannot exceed the actual exempt income earned.

CIT v. Woodward Governor India Pvt. Ltd.
312 ITR 254 · 2009 · Supreme Court
968
citing judgments

Foreign exchange fluctuations, whether gains or losses, are inextricably linked to the underlying business transaction and must be accounted for under the mercantile system. The Supreme Court also affirmed the standard accounting principle of valuing stock at cost or net realisable value, whichever is lower.

CIT v. Excel Industries Ltd.
358 ITR 295 · 2013 · Supreme Court
935
citing judgments

When an income or expenditure is revenue neutral across different assessment years, where any benefit derived is offset by a corresponding liability or reversal, no additional tax liability arises, particularly concerning income recognition under the mercantile system of accounting.

Judgments on Section 37(1)

M/S. Gupta Bros. (India), New Delhi vs. ACIT, New Delhi

In the result, the appeals of the assessee are partly allowed

ITA 1111/DEL/2015[2011-12]Status: DisposedITAT Delhi20 Aug 2019AY 2011-12

Bench: Sh. H. S. Sidhudr. B. R. R. Kumarita No. 1110/Del/2015 : Asstt. Year : 2010-11 Ita No. 1111/Del/2015 : Asstt. Year : 2011-12 M/S Gupta Bros. (India), Vs Acit, 232, Jor Bagh, Circle-38(1), New Delhi-110003 New Delhi (Appellant) (Respondent) Pan No. Aaafg4325Q Assessee By : Sh. S. Krishna & V. Raj Kumar, Adv. Revenue By : Sh. Amit Katoch, Sr. Dr Date Of Hearing: 31.07.2019 Date Of Pronouncement: 20.08.2019 Order Per Dr. B. R. R. Kumar: Brief Facts Of The Case Are That The Assessee Is A Civil Construction Contractor Engaged In The Business Of Repairs Of Civil Works. During The Year The Assessee Has Incurred Labour Expenses Of Rs.11.39 Crores Against The Total Work Executed Of Rs.62.81 Crores. The Assessing Officer Held That The 18.14% Of The Labour Expenses Over The Turnover Is Far More Excessive Than The Labour Expenses In The Earlier Years Of 15.22% To 16.99%. He Further Held That The Labour Payments Been Made In The Months February & March Are To The Tune Of Rs.1.29 Crores & The Gross Turnover For The March Month Is Rs.9.97 Crores & The Percentage Of Labour Is About 13.26%. Based On Comparison Of The Payments Of The Ita Nos. 1110 & 1111/Del/2015 2 Gupta Bros. (India) Earlier Years, The Assessing Officer Has Disallowed Rs.25 Lacs On Account Of Labour Payment.

For Appellant: Sh. S. Krishna & V. Raj Kumar, AdvFor Respondent: Sh. Amit Katoch, Sr. DR

M/S. Gupta Bros. (India), New Delhi vs. ACIT, New Delhi

In the result, the appeals of the assessee are partly allowed

ITA 1110/DEL/2015[2010-11]Status: DisposedITAT Delhi20 Aug 2019AY 2010-11

Bench: Sh. H. S. Sidhudr. B. R. R. Kumarita No. 1110/Del/2015 : Asstt. Year : 2010-11 Ita No. 1111/Del/2015 : Asstt. Year : 2011-12 M/S Gupta Bros. (India), Vs Acit, 232, Jor Bagh, Circle-38(1), New Delhi-110003 New Delhi (Appellant) (Respondent) Pan No. Aaafg4325Q Assessee By : Sh. S. Krishna & V. Raj Kumar, Adv. Revenue By : Sh. Amit Katoch, Sr. Dr Date Of Hearing: 31.07.2019 Date Of Pronouncement: 20.08.2019 Order Per Dr. B. R. R. Kumar: Brief Facts Of The Case Are That The Assessee Is A Civil Construction Contractor Engaged In The Business Of Repairs Of Civil Works. During The Year The Assessee Has Incurred Labour Expenses Of Rs.11.39 Crores Against The Total Work Executed Of Rs.62.81 Crores. The Assessing Officer Held That The 18.14% Of The Labour Expenses Over The Turnover Is Far More Excessive Than The Labour Expenses In The Earlier Years Of 15.22% To 16.99%. He Further Held That The Labour Payments Been Made In The Months February & March Are To The Tune Of Rs.1.29 Crores & The Gross Turnover For The March Month Is Rs.9.97 Crores & The Percentage Of Labour Is About 13.26%. Based On Comparison Of The Payments Of The Ita Nos. 1110 & 1111/Del/2015 2 Gupta Bros. (India) Earlier Years, The Assessing Officer Has Disallowed Rs.25 Lacs On Account Of Labour Payment.

For Appellant: Sh. S. Krishna & V. Raj Kumar, AdvFor Respondent: Sh. Amit Katoch, Sr. DR

Burckhardt Compression India Pvt. Ltd., Pune vs. Deputy Commissioner of Income-Tax, Pune

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

ITA 221/PUN/2016[2011-12]Status: DisposedITAT Pune19 Aug 2019AY 2011-12

Bench: Ms. Sushma Chowla, Jm & Shri D. Karunakara Rao, Am आयकर अपील सं. / Ita No.221/Pun/2016 िनधा"रण वष" / Assessment Year : 2011-12 Burckhardt Compression India Pvt. Ltd., Gat No.304, Village: Kondhapuri, Pune – Nagar Road, Tal: Shirur, Pune-412209. अपीलाथ"/Appellant Pan : Aadcb2058D …. Vs. Dcit, Circle-1(1), …. ""थ" / Respondent Pune. Assessee By : Shri Abhay Avchat Revenue By : Ms. Amrita Mishra सुनवाई क" तारीख / घोषणा क" तारीख / Date Of Hearing : 27.06.2019 Date Of Pronouncement: 19.08.2019 आदेश / Order Per D. Karunakara Rao, Am : This Appeal Is Filed By The Assessee Against The Order Of The Drp/Tpo/Assessing Officer For The Assessment Year 2011-12. 2. The Grounds Raised By The Assessee Are As Under :- The Learned Assessing Officer Has Erred In Making Addition Of “1. Rs.2,08,64,219/- On Account Of Adjustment Made To International Transaction Of Payment Of Management Services & The Hon’Ble Dispute Resolution Panel Erred In Directing The Disallowance. The Assessee Company Has Made Payment To Its Associated 2. Enterprise Of Rs.2,08,64,219/- Towards Manufacturing Service Fees & There Is Error Of Considering In Assessment An Arm’S Length Price Of This Expenditure As ‘Nil’. 3. The Order Under Section 143(3) Of The Income Tax Act 1961 In Pursuance Of Directions Of The Dispute Resolution Panel, Dated 23.12.2015 Of The Ao In Case Of The Assessee Is Bad In Law. 4. The Appellant Craves Leave To Add, Amend, Alter, Omit Or Substitute Any Of The Grounds Of Appeal.”

For Appellant: Shri Abhay AvchatFor Respondent: Ms. Amrita Mishra
Section 143(3)