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

Neeraj Gas Movers, Allahabad vs. ITO 1 (3), Allahabad

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

ITA 55/ALLD/2023[2016-17]Status: DisposedITAT Allahabad12 Sept 2023AY 2016-17

Bench: Shri Aby T. Varkey, Jm आयकर अपील सं/ I.T.A. No.55/Alld/2023 (ननधधारण वर्ा / Assessment Year: 2016-17) बनधम/ Neeraj Gas Movers Ito-1(3) Through Its Partner, 215/1, Allahabad. Vs. Chaukhandi, Kydganj, Allahabad-211003, Uttar Pradesh. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aakfn1654M (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee By: Shri Tanmay Sadh Revenue By: Shri A. K. Singh (Sr. Dr) सुनवाई की तारीख / Date Of Hearing: 05/09/2023 घोषणा की तारीख /Date Of Pronouncement: 12/09/2023 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Assessee Against The Order Of The Ld. Cit(A)/Nfac, Delhi Dated 11.03.2023 For Ay. 2016-17. 2. The Main Grievance Of The Assesse/Firm Is Against The Action Of The Ld. Cit(A) Confirming The Action Of Ao Disallowing The Claim Of Salary & Interest On Capital For Three (3) Partners Due To Erroneous Consideration Of The Partnership Deed Dated 01.02.2013, Whereas According To The Assesse, Another Deed/Rectified Partnership Deed Dated 13.05.2013 Was Executed By Partners & Income Tax Department Issued Pan For The Assesse/Firm On The Basis Of The Very Same Deed Dated 13.05.2013, Which Deed Ought To Have Been Considered By Ao/Ld Cit(A) Wherein There Were Specific Provisions For The Firm To Give Remuneration/Salary As Well As Interest Of 12% On The Capital Contribution Of The Partners.

For Appellant: Shri Tanmay SadhFor Respondent: Shri A. K. Singh (Sr. DR)