Business expenditure for remittance facilitation services allowed where evidence showed genuine payments, business need, and operational benefit.

Professional fees paid for facilitating foreign remittances in connection with imports were held allowable as business expenditure under section 37(1) because the payments were routed through banking channels, tax was deducted at source, and the recipient confirmed the transactions with supporting records. The assessee also showed that OFAC-related banking delays affected Iranian-origin imports and that the services helped expedite remittances, improve the payment cycle, and support turnover and profits. The revenue's objections rested on assumptions about the recipient's business profile and infrastructure, without independent inquiry to prove the payments were sham, fictitious, or circulated back to the assessee. The disallowance was deleted.

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Issues: Whether the professional fees paid for facilitation of foreign remittances in connection with imports were allowable as business expenditure.

Analysis: The payment was made through banking channels after deduction of tax at source, and the recipient responded to the notice under section 133(6) of the Income-tax Act, 1961 by confirming the transactions and furnishing return of income, audited financials, invoices, and bank statements. The assessee placed material to show that imports of Iranian-origin goods were affected by OFAC-related banking delays and that the impugned services were engaged to expedite remittances and smoothen business operations. The evidence showed reduction in the payment cycle, increase in turnover, and higher profits after availing the services. The revenue's objections were based largely on assumptions about the nature of the recipient's business, its client profile, and infrastructure, without any independent inquiry to establish that the payments were sham, fictitious, or had flown back to the assessee.

Conclusion: The expenditure was incurred wholly and exclusively for business purposes and was allowable under section 37(1) of the Income-tax Act, 1961; the disallowance was unsustainable and was deleted.

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