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

Heideberg India Private Limited, Chennai vs. DCIT Corporate Circle 2(2), Chennai

In the result, the appeal filed by the assessee is partly allowed for statistical purposes

ITA 1476/CHNY/2018[2004-05]Status: DisposedITAT Chennai16 Feb 2021AY 2004-05

Bench: Shri Duvvuru Rl Reddy & Shri S. Jayaramanआयकर अपील सं./I.T.A. No.1476/Chny/2018 िनधा"रण वष"/Assessment Year:2004-05 M/S. Heidelberg India Private Limited, The Deputy Commissioner Of Vs. No. 333,Gst Road, Chrompet, Income Tax, Corporate Circle 2(2), Chennai 600 044. No. 121, Mahatma Gandhi Road, [Pan: Aabch0615E] Nungambakkam, Chennai 600 034. (अपीलाथ" /Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By : Shri S.P. Chidambaram, Advocate ""थ" की ओर से/Respondent By : Shri Suresh Periasamy, Jcit सुनवाई की तारीख/ Date Of Hearing : 02.12.2020 घोषणा की तारीख /Date Of Pronouncement : 16.02.2021 आदेश /O R D E R Per Duvvuru Rl Reddy: This Appeal Filed By The Assessee Is Directed Against The Order Of The Ld. Commissioner Of Income Tax (Appeals) 13, Chennai Dated 05.01.2018 Relevant To The Assessment Year 2004-05. In The Grounds Of Appeal, The Assessee Has Challenged The Confirmation Of Disallowance Of Claim Of Deduction Of Forfeiture Of Advance Rent.

For Appellant: Shri S.P. Chidambaram, AdvocateFor Respondent: Shri Suresh Periasamy, JCIT
Section 115ISection 133(6)Section 143(1)Section 143(2)Section 143(3)Section 254

Nirmal Commercial Ltd, Mumbai vs. ITO WD 3(3)(3), Mumbai

In the result, the appeal filed by the assessee is hereby allowed

ITA 1233/MUM/2017[2013-14]Status: DisposedITAT Mumbai09 Feb 2021AY 2013-14

Bench: Shri M. Balaganesh, Am & Shri Amarjit Singh, Jm आयकर अपील सं/ I.T.A. No.1233/Mum/2017 (निर्धारण वर्ा / Assessment Year: 2013-14) Shree Nirmal Commercial बिधम/ Income Tax Officer Ward Ltd. 3(3)(3) Vs. 241/242, Nirmal Bldg, Aaykar Bhavan, Mumbai- Backbay Reclamation, 400020. Nariman Point, Mumba- 400021. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Aaacs7533F (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee By: Shri K. Gopal Ms. Neha Paranjpe Revenue By: Shri Rajendra Joshi (Dr) सुनवाई की तारीख / Date Of Hearing: 02/12/2020 घोषणा की तारीख /Date Of Pronouncement: 09/02/2021 आदेश / O R D E R Per Amarjit Singh, Jm: The Assessee Has Filed The Present Appeal Against The Order Dated 28.11.2016 Passed By The Commissioner Of Income Tax (Appeals) -8, Mumbai [Hereinafter Referred To As The “Cit(A)”] Relevant To The A.Y.2013- 14. 2. The Assessee Has Raised The Following Grounds: - “1.1 On The Facts & Circumstances Of The Case & In Law The Assessing Officer Has Erred In Considering The Following Expenses As Capital Expenditure Instead Of Revenue Expenditure Out Of The Total Expenses Of Repairs & Maintenance Of Rs. 70,04,835 Debited To Profit & Loss Account & Cit(A) In Confirming The Same. A.Y.2013-14 Name Of Party Rupees M/S. Bagwe Engineering Ltd. 12,17,472 M/S. Kamal Marble 23,62,501 M/S. Vinod Engineering 17,77,716 Total 53,57,689 2.2 The Cit(A) & The Assessing Officer Is Of The View That The Above Expenditures Have Not Been Incurred In Relation To Annual Maintenance Cost For Normal Wear & Tear & The Said Expenditures Are Expected To Give Long Lasting Benefit To The Appellant & Hence, Erred In Considering The Same As Capital Expenditure.

For Appellant: Shri K. GopalFor Respondent: Shri Rajendra Joshi (DR)