Aggregate expenditure rule governs disallowance under section 37(3A), so branch-wise computation is not permitted.

For section 37(3A) of the Income-tax Act, 1961, disallowance had to be computed on the assessee's aggregate specified expenditure as a whole, not separately for each business unit or office. The Court accepted that the statutory phrase "aggregate expenditure incurred by the assessee" treats the assessee as a single entity for this purpose, even where separate accounts are maintained for different branches. The issue was answered against the assessee and in favour of the Revenue, so the disallowance had to be worked out on the total specified expenditure.

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Issues: Whether, for the purpose of section 37(3A) of the Income-tax Act, 1961, the disallowance was to be computed on the aggregate specified expenses of the assessee as a whole or separately for each business unit and office maintained by it.

Analysis: The assessee maintained separate accounts for different branches and sought computation of disallowance unit-wise. The Court accepted the Tribunal's view that the statutory expression used in section 37(3A) is "aggregate expenditure incurred by the assessee", which does not permit treating the different units as independent entities for separate computation of the disallowance.

Conclusion: The question was answered against the assessee and in favour of the Revenue; the disallowance under section 37(3A) had to be worked out on the total specified expenditure of the assessee.

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