Section 37 of the Income Tax Act

The decision most relied on for Section 37 is Empire Jute Co. Ltd. v. CIT (124 ITR 1), cited in 622 of the 4,334 judgments on BharatTax that turn on this section.

Leading authorities on Section 37

Empire Jute Co. Ltd. v. CIT
124 ITR 1 · 1980 · Supreme Court
622
citing judgments

Expenditure is classified as revenue or capital based on its practical business effect, necessity, or expediency, rather than solely on the juristic classification of rights; an enduring benefit does not automatically make an expenditure capital if it facilitates trading operations or business efficiency.

Sony Ericsson Mobile Communications India Pvt. Ltd. v. CIT
374 ITR 118 · 2015 · High Court
499
citing judgments

The existence of an international transaction for Advertising and Marketing Promotion (AMP) expenditure requires the revenue to discharge the burden of proof. An explanation inserted under Section 92B does not automatically make AMP expenditure an international transaction.

CIT v. Dalmia Cement (Bharat) Ltd.
254 ITR 377 · 2002 · High Court
417
citing judgments

When there is a nexus between an expenditure and the purpose of business, incurred on grounds of commercial expediency, the Revenue cannot question its reasonableness or assume the role of the businessman to compel profit maximization. This principle applies even if the business is not that of the assessee itself.

Eastern Investments Ltd. v. CIT
38 ITR 601 · 1960 · Supreme Court
346
citing judgments

Expenditure must be commercially expedient for carrying on the business, and it is not for revenue authorities to dictate how an assessee should conduct its business. The court will not question the business expediency of a transaction, even if a third party also benefits.

Sassoon J. David & Co. Pvt. Ltd. v. CIT
118 ITR 261 · 1979 · Supreme Court
323
citing judgments

An expense incurred by an assessee for its own business, such as advertising, marketing, and promotional (AMP) expenses, cannot be disallowed merely because it incidentally or indirectly benefits the assessee's sister concerns or associated enterprises.

Biocon Ltd. v. DCIT
35 Taxmann.com 335 · 2013 · ITAT
322
citing judgments

The discount arising from the grant of Employee Stock Option Plans (ESOPs) is an allowable business expenditure under Section 37(1) of the Income-tax Act, 1961, as it is an ascertained liability, not a contingent one, and constitutes a revenue expense rather than a capital expense.

Skycell Communications Ltd. v. DCIT
251 ITR 53 · 2001 · High Court
253
citing judgments

Technical services involve human intervention and expertise, not just routine or machine-based operations. Routine customer support and standard facility provision through technology do not constitute technical services under the Act.

India Cements Ltd. v. CIT
60 ITR 52 · 1966 · Supreme Court
247
citing judgments

Expenses incurred for obtaining a loan for the purpose of the assessee's business, such as debenture discount, bank guarantee charges, and stamp duty, are considered revenue expenditure. These liabilities, though potentially spread over time, are deductible as revenue expenses.

CIT v. Madras Auto Service (P) Ltd.
233 ITR 468 · 1998 · Supreme Court
246
citing judgments

Expenditure providing an enduring advantage, such as upfront lease rent for land, is revenue expenditure if no capital asset is acquired or generated, allowing for deduction under Section 37, even when capitalized in the books of account.

Tata Consultancy Services v. State of Andhra Pradesh
271 ITR 401 · 2004 · Supreme Court
231
citing judgments

The sale of 'canned software' in physical form is the sale of a copyrighted article and constitutes 'goods,' distinct from the underlying copyright. This case provides foundational principles for distinguishing copyrighted works from copyrighted articles and for what qualifies as 'production or manufacturing of goods or articles' under tax laws.

Judgments on Section 37

M/S Tejas Networks Limited, Bangalore vs. Assistant Commissioner of Income Tax Circle-1 Ltu, Bangalore

In the result, the appeals filed by the assessee are partly allowed

ITA 764/BANG/2017[2012-13]Status: DisposedITAT Bangalore31 May 2022AY 2012-13

Bench: Shri Chandra Poojari, Am & Shri George George K, Jm It(Tp)A No.764/Bang/2017 : Asst.Year 2012-2013 It(Tp)A No.205/Bang/2018 : Asst.Year 2013-2014 M/S.Tejas Networks Limited The Assistant Commissioner Plot No.25, Jp Software Park Of Income-Tax, Circle – 1, Ltu V. Bangalore. Electronic City Phase-I Hosur Road, Bangalore – 560 100. Pan : Aabct1670M. (Appellant) (Respondent) Appellant By : Sri.S.Annamalai, Advocate Respondent By : Sri.Sumer Singh Meena, Cit-Dr Date Of Pronouncement : 31.05.2022 Date Of Hearing : 19.05.2022 O R D E R Per George George K, Jm : These Appeals At The Instance Of The Assessee Are Directed Against Final Assessment Orders Dated 31.01.2017 & 23.11.2017, Passed U/S 143(3) R.W.S. 144C Of The I.T.Act. The Relevant Assessment Years Are 2012-2013 & 2013- 2014. We Shall First Adjudicate It(Tp)A No.764/Bang/2017 Pertaining To The Assessment Year 2012-2013. It(Tp)A No.764/Bang/2017 (Asst.Year 2012-2013) 2. The Brief Facts Of The Case Are As Follows: The Assessee Is A Company Engaged In The Business Of Design, Development, Manufacture Of Telecommunication Equipments. For The Assessment Year 2012-2013, The Return

For Appellant: Sri.S.Annamalai, AdvocateFor Respondent: Sri.Sumer Singh Meena, CIT-DR
Section 143(2)Section 143(3)Section 92BSection 92C

Racold Thermo Private Limited, (Formerly Know As Racold Thermo Limited), Pune vs. Assistant Commissioner of Income-Tax, Circle - 10, Pune

In the result, the appeal of the assessee is Allowed for Statistical

ITA 2654/PUN/2017[2012-13]Status: DisposedITAT Pune12 May 2022AY 2012-13

Bench: Shri Partha Sarathi Chaudhury, Jm & Dr. Dipak P. Ripote, Am आयकरअपीलसं. / Ita No.2654/Pun/2017 िनधा"रणवष" / Assessment Year : 2012-13 Racoldthermo Private Limited The Assistant Commissioner Of (Formerly Known As Racoldthermo Vs Income Tax, Circle-10, Limited), Pune. Gat No.265/374-376, Kharabwadi, Chakan-Talegaon Road, Tal.Khed, Chakan, Pune - 410501. Pan No. Aaecm 0766 G Appellant/ Assessee Respondent /Revenue Assessee By Shri Ketan Ved- Ar Revenue By Shri S.P.Walimbe- Dr Date Of Hearing 25/03/2022 Date Of Pronouncement 12/05/2022 आदेश/ Order Per: Dr. Dipak P. Ripote, Am: This Is An Appeal Filed By The Assessee Directed Against The Order Of Ld.Commissioner Of Income Tax(Appeals)-6, Pune,(In Short, The Cit(A) In Appeal No.Pn/Cit(A)-V/Acit Cir-10/103/2016-17Dated 30/08/2017 For The Assessment Year 2012-13.The Assessee Has Raised Following Grounds Of Appeal: “1:0 Re: Disallowance Of Provision For Obsolescence Of Inventory: 1:1 The Commissioner Of Income Tax (Appeals) Has Erred In Confirming The Disallowance On Account Of Provision For Obsolescence Of Inventory Amounting To Rs. 60,00,000/-. 1:2 The Appellant Submits That Considering The Facts & Circumstances Of Its Case & The Law Prevailing On The Subject, No Disallowance Whatsoever Is Called For Out Of The Provision Made By The Appellant For Obsolescence Of Inventory & The Stand Taken By The Assessing Officer In This Regard Is Erroneous & Not In Accordance With Law & The Commissioner Of Income Tax (Appeals) Ought To Have Held As Under: 1:3 The Appellant Submits That The Assessing Officer Be Directed To Delete The Disallowance & To Re-Compute Its Total Income Accordingly.