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

The DCIT-4(1)(1), Mumbai vs. M/S Carnoustie Management India Private Limited, Mumbai

In the result, both the appeals of the Revenue are dismissed

ITA 2763/MUM/2022[2015-16]Status: DisposedITAT Mumbai13 Apr 2023AY 2015-16

Bench: Shri Vikas Awasthy & Shri Amarjit Singhita Nos. 2762 & 2763/Mum/2022 (A.Ys.2014-15 & 2015-16) The Dcit-4(1)(1) Vs. M/S Carnoustie Room No. 640, 6 Th Floor, Management India Pvt Aaykar Bhavan, M.K. Ltd, Carnoustie 326, Road, Mumbai Master Mind-1, Royal 400 020 Palm Aarey Colony, Goregaon (East) Mumbai – 400090 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No: Aaccc9741R Appellant .. Respondent Appellant By : Devendra Jain Respondent By : Shreekala Pardesi Date Of Hearing 11.04.2023 Date Of Pronouncement 13.04.2023 आदेश / O R D E R Per Amarjit Singh (Am): These Two Appeals Filed By The Revenue Are Directed Against Two Different Orders Of Nfac, Delhi, Dated 30.08.2022. Since Common Issue On Identical Facts Are Involved In These Two Appeals Filed By The Revenue, Therefore, These Appeals Are Adjudicated Together By Taking Ita No. 2763/Mum/2022 As Lead Case & Its Finding Will Be Applied To Ita No. 2762/Mum/2022 Mutatis Mutandis. “1. On The Facts & Circumstances Of The Case & In Law The Cit(A) Erred In Deleting The Disallowance Made Of Rs. 5,67,00,404/- Without Establishing The Nexus Between The Expenditure Incurred In The Current Year With The Income Generated In The Subsequent Years.

For Appellant: Devendra JainFor Respondent: Shreekala Pardesi
Section 143(2)Section 14ASection 37

The DCIT-4(1)(1), Mumbai vs. M/S Carnoustie Management India Private Limited, Mumbai

In the result, both the appeals of the Revenue are dismissed

ITA 2762/MUM/2022[2014-2015]Status: DisposedITAT Mumbai13 Apr 2023AY 2014-2015

Bench: Shri Vikas Awasthy & Shri Amarjit Singhita Nos. 2762 & 2763/Mum/2022 (A.Ys.2014-15 & 2015-16) The Dcit-4(1)(1) Vs. M/S Carnoustie Room No. 640, 6 Th Floor, Management India Pvt Aaykar Bhavan, M.K. Ltd, Carnoustie 326, Road, Mumbai Master Mind-1, Royal 400 020 Palm Aarey Colony, Goregaon (East) Mumbai – 400090 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No: Aaccc9741R Appellant .. Respondent Appellant By : Devendra Jain Respondent By : Shreekala Pardesi Date Of Hearing 11.04.2023 Date Of Pronouncement 13.04.2023 आदेश / O R D E R Per Amarjit Singh (Am): These Two Appeals Filed By The Revenue Are Directed Against Two Different Orders Of Nfac, Delhi, Dated 30.08.2022. Since Common Issue On Identical Facts Are Involved In These Two Appeals Filed By The Revenue, Therefore, These Appeals Are Adjudicated Together By Taking Ita No. 2763/Mum/2022 As Lead Case & Its Finding Will Be Applied To Ita No. 2762/Mum/2022 Mutatis Mutandis. “1. On The Facts & Circumstances Of The Case & In Law The Cit(A) Erred In Deleting The Disallowance Made Of Rs. 5,67,00,404/- Without Establishing The Nexus Between The Expenditure Incurred In The Current Year With The Income Generated In The Subsequent Years.

For Appellant: Devendra JainFor Respondent: Shreekala Pardesi
Section 143(2)Section 14ASection 37

Binayak Hi-Tech Engineering Ltd., Howrah vs. I.T.O., Ward-6(1), Kolkata

In the result, appeal of the assessee is allowed

ITA 2568/KOL/2019[2013-14]Status: DisposedITAT Kolkata31 Mar 2023AY 2013-14

Bench: Shri Sanjay Garg, Hon’Ble & Shri Rajesh Kumar, Hon’Blei.T.A. No. 2568/Kol/2019 Assessment Year: 2013-14 Binayak Hi-Tech Engineering Ltd. Income Tax Officer, Ward-6(1), Vs Kolkata 117/2, Mirpara Road, Bhattanagar Liluah Howrah - 711203 [Pan : Aabcb2869G] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri Miraj D. Shah, A/R Revenue By : Smt. Ranu Biswas, Addl. Cit, D/R सुनवाई क" तारीख/Date Of Hearing : 27/03/2023 घोषणा क" तारीख /Date Of Pronouncement: 29/03/2023 आदेश/O R D E R Per Rajesh Kumar: This Is The Appeal Preferred By The Assessee Against The Order Of The Learned Commissioner Of Income Tax (Appeals)-11, Kolkata (Hereinafter Referred To As The Ld. Cit(A)”], Passed U/S 250 Of The Income-Tax Act, 1961 (Hereinafter The ‘Act’), Dated 30/10/2019 For The Assessment Year 2013-14. 2. Ground No. 1 Is General In Nature & Requires No Adjudication. 3. The Ld. Counsel For The Assessee, At The Outset Submitted That He Is Not Pressing Ground No. 2 & The Same Is Dismissed As Such. 4. The Issue Raised In Ground No. 3 Is Against The Confirmation Of Addition By The Ld. Cit(A) Of Rs.6,41,980/-, As Made By The Assessing Officer On Account Of Foreign Travel Expenses. 5. Brief Facts Of The Case Are That The Assessing Officer During The Course Of Assessment Proceedings Found That All Three Directors Of The Assessee Company Travelled Abroad & Incurred Expenditure By Way Of Air Tickets

For Appellant: Shri Miraj D. Shah, A/RFor Respondent: Smt. Ranu Biswas, Addl. CIT, D/R
Section 250Section 37

M/S Gowri Infraengineers Pvt Ltd, Bangalore vs. Assistant Commissioner of Income Tax Central Circle-2(4), Bangalore

In the result, the appeal filed by the assessee stands partly allowed

ITA 55/BANG/2023[2018-19]Status: DisposedITAT Bangalore30 Mar 2023AY 2018-19

Bench: Smt. Beena Pillai & Ms. Padmavathy Sassessment Year : 2018-19 M/S. Gowri Infraengineers Pvt. Ltd., The Assistant No. 18, 5Th Cross, Commissioner Of 2Nd Stage, 14Th Block, Income Tax, Nagarabhavi, Central Circle – 2(4), Bengaluru – 560 072. Vs. Bengaluru. Pan: Aadcg9044N Appellant Respondent Assessee By : Shri Hemanth Pai, Ca Revenue By : Shri D.K. Mishra, Cit -Dr Date Of Hearing : 23-03-2023 Date Of Pronouncement : 30-03-2023 Order Per Beena Pillaipresent Appeal Is Filed By Assessee Against Order Dated 15.07.2022 Passed By Ld.Cit(A)-11, Bangalore For A.Y. 2018-19 On Following Grounds Of Appeal: “1. The Order Passed By The Learned Commissioner Of Income Tax (Appeals) — 11, Bengaluru ("Cit(A)") Under Section 250 Of The Income Tax Act, 1961 ("The Act") Insofar As It Is Against The Appellant, Is Opposed To Law, Weight Of Evidence, Natural Justice & Probabilities On The Facts & Circumstances Of The Appellant'S Case. 2. The Appellant Denies Himself Liable To Be Assessed At Rs. 34,50,31,775/- As Against The Returned Income Of Rs. 5,01,44,290/- On The Facts & Circumstances Of The Case.

For Appellant: Shri Hemanth Pai, CAFor Respondent: Shri D.K. Mishra, CIT -DR
Section 143(1)Section 143(3)Section 154Section 234ASection 250Section 37