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)

Macleods Pharmaceuticals Ltd, Mumbai vs. Addl CIT 8(2), Mumbai

In the result, both appeals of assessee are allowed

ITA 7405/MUM/2014[2011-12]Status: DisposedITAT Mumbai21 Sept 2016AY 2011-12

Bench: Shri R.C. Sharma & Shri Sandeep Gosainआमकय अऩीर सं./Ita Nos.7404 & 7405/M/2014 (निर्धारण वषा / Assessment Year; 2010-11 & 2011-12) Macleods Pharmaceuticals Addl. Cit 8(2) बिधम/ Ltd. 304 Atlant Arcade Marol Mumbai – Church Rd. Andheri (E) Vs. Mumbai – 4000059 Pan: Aaacm4100C (अऩीराथी/Appellant) (प्रत्मथी/Respondent) Assessee By : Shri Ashok Bansal (Ar) Revenue By : Shri N. P. Singh (Cit. Dr) सुनवाई की तायीख/Date Of Hearing : 13.07.2016 घोषणा की तायीख /Date Of Pronouncement : 21.09.2016 आदेश / O R D E R Per R.C.Sharma (A.M.) : These Are The Appeals Filed By The Assessee Against The Order Of Cit(A), For Assessment Year 2010-11 & 2011-12, In The Matter Of Order Passed Under Section 143(3) Of The I.T. Act. 2. Common Grievance Of The Assessee In Both The Years Relate To Disallowance On Account Of „Sales Promotion Expenses‟. 3. Rival Contentions Have Been Heard On Record & Perused. Facts In Brief Are That The Assessee Is Engaged In The Business Of Manufacturing & Dealing In Pharmaceutical Products, Namely Tablets, Capsules, Liquids, Injectibles Etc. The Assessee Company Has Manufacturing Plant At Palghar, Daman Phase-I(3 Units), Daman Phase-Ii, Kabra, Dhanlaxmi, Sarigam & Baddi. The Assessee Company Also Has One R&D Unit At Mumbai. During The Assessment Year 2010-2011, The Assessee Has Shown Gross Profit & Net Profit Has Been Shown @47.86% & @15.55% Respectively. Separate Balance Sheets & Profits & Loss Accounts For Each Plant & R&D Unit Have Been Obtained, Examined & Placed On Record. From The Record, We

For Appellant: Shri Ashok Bansal (AR)For Respondent: Shri N. P. Singh (CIT. DR)
Section 143(3)Section 37(1)

Macleods Pharmaceuticals Ltd, Mumbai vs. Addl CIT 8(2), Mumbai

In the result, both appeals of assessee are allowed

ITA 7404/MUM/2014[2010-11]Status: DisposedITAT Mumbai21 Sept 2016AY 2010-11

Bench: Shri R.C. Sharma & Shri Sandeep Gosainआमकय अऩीर सं./Ita Nos.7404 & 7405/M/2014 (निर्धारण वषा / Assessment Year; 2010-11 & 2011-12) Macleods Pharmaceuticals Addl. Cit 8(2) बिधम/ Ltd. 304 Atlant Arcade Marol Mumbai – Church Rd. Andheri (E) Vs. Mumbai – 4000059 Pan: Aaacm4100C (अऩीराथी/Appellant) (प्रत्मथी/Respondent) Assessee By : Shri Ashok Bansal (Ar) Revenue By : Shri N. P. Singh (Cit. Dr) सुनवाई की तायीख/Date Of Hearing : 13.07.2016 घोषणा की तायीख /Date Of Pronouncement : 21.09.2016 आदेश / O R D E R Per R.C.Sharma (A.M.) : These Are The Appeals Filed By The Assessee Against The Order Of Cit(A), For Assessment Year 2010-11 & 2011-12, In The Matter Of Order Passed Under Section 143(3) Of The I.T. Act. 2. Common Grievance Of The Assessee In Both The Years Relate To Disallowance On Account Of „Sales Promotion Expenses‟. 3. Rival Contentions Have Been Heard On Record & Perused. Facts In Brief Are That The Assessee Is Engaged In The Business Of Manufacturing & Dealing In Pharmaceutical Products, Namely Tablets, Capsules, Liquids, Injectibles Etc. The Assessee Company Has Manufacturing Plant At Palghar, Daman Phase-I(3 Units), Daman Phase-Ii, Kabra, Dhanlaxmi, Sarigam & Baddi. The Assessee Company Also Has One R&D Unit At Mumbai. During The Assessment Year 2010-2011, The Assessee Has Shown Gross Profit & Net Profit Has Been Shown @47.86% & @15.55% Respectively. Separate Balance Sheets & Profits & Loss Accounts For Each Plant & R&D Unit Have Been Obtained, Examined & Placed On Record. From The Record, We

For Appellant: Shri Ashok Bansal (AR)For Respondent: Shri N. P. Singh (CIT. DR)
Section 143(3)Section 37(1)