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

Rattan Steel Supply Co., Kolkata vs. ACIT, Cir-36, Kolkata

In the result, the appeal of the assessee is allowed in part

ITA 922/KOL/2016[2010-2011]Status: DisposedITAT Kolkata20 Sept 2017AY 2010-2011

Bench: Hon’Ble Shri J. Sudhakar Reddy] I.T.A. No. 922/Kol/2016 Assessment Year 2010-11 M/S. Rattan Steel Supply Co..............................………………………………Appellant 33/1 N.S. Road, Room No. 169, 1St Floor Kolkata – 700001 [Pan : Aadfr7627K] Acit Circle – 36 Kolkata...................………………………………………….Respondent Aayakar Bhawan, Poorva Kolkata Appearances By: Shri Miraj D Shah, Advocate Appearing On Behalf Of The Assessee. Shri Arnidam Bhattacharjee, Addl Cit Appearing On Behalf Of The Revenue. Date Of Concluding The Hearing : July 26, 2017 Date Of Pronouncing The Order : September 20, 2017 Order This Is An Appeal Filed By The Assessee Directed Against The Order Of Commissioner Of Income Tax (Appeals) - 10, Kolkata Dated 22.04.2013 For The Assessment Year 2010-11 On The Following Grounds: 1. That The Learned Commissioner Of Income-Tax (Appeals)-10, Kolkata Has Erred In Law & In Facts In Confirming The Following Additions Made By The Assessing Officer. I. Addition Of Commission Expense Of Rs. 7,22,432/- Ii. Addition Of Motor Car Expense Of Rs. 23,371/- On Estimate Under Section 37. 2. The Appellant Craves Leave To Add/Alter/Modify Any Other Grounds Of Appeal Before Or At The Time Of Hearing. 2. After Hearing The Rival Contention, We Hold As Follows. Ground No 1 Is On The Disallowance Of Commission Expenses On The Ground

Section 136Section 37