TaxTMI 
TaxTMI 
2026 (8) TMI 210
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....n question the correctness of the order dated 21.04.2017 passed by the Income Tax Appellate Tribunal, Bengaluru 'B' Bench, Bengaluru, in ITA No. 849/Bang/2014 for the Assessment Year 2009-10. The appeal was admitted on 05.12.2017 to examine the following questions of law:- (i) Whether the Tribunal was justified in law in upholding the disallowance of legitimate business expenditure of Rs. 53,48,852/ incurred towards business promotion expenditure claimed in the profit and loss account on the erroneous appreciation of the claim and scope of Explanation (1) to section 37 (1) of the Act, on the facts and circumstances of the case. (ii) Whether the Tribunal was justified in law in holding that secret commission paid for gettin....
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....s in the Human Resources Department of the client companies to ensure that such persons extend business to the appellant. The appellant contended that the expenditure was incurred wholly and exclusively for the purpose of business and that such payments were not in the nature of bribe so as to attract Explanation (1) to Section 37(1) of the Act. 6. However, the Assessing Officer characterised such payments as bribes and disallowed the claim of expenditure. Accordingly, an amount of Rs. 53,48,852/- was added back to the total income of the appellant by order dated 05.12.2011 passed under Section 143(3) of the Act. 7. Being aggrieved by the said order, the appellant preferred an appeal before the Commissioner of Income-tax (Appeals)-I, ....
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....to Section 37(1) of the Act was not attracted. 11. Per contra, learned counsel for the respondent supported the order passed by the Tribunal. It is submitted that the appellant, having claimed deduction under Section 37(1) of the Act, was required to establish the nature of expenditure and prove that such expenditure was incurred wholly and exclusively for the purpose of business. 12. The learned counsel submitted that the appellant failed to furnish the basic details regarding the alleged commission payments, including the names and addresses of the recipients, details of payments, dates of payments, mode of payment and supporting documentary evidence. The authorities below were justified in disallowing the expenditure claimed by the....
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.... on the assertion of the assessee. The assessee claiming such deduction is required to establish the nature of expenditure and the circumstances in which such expenditure was incurred. Section 37 of the Income Tax Act reads as under:- 37. General.-(1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". [Explanation 1.-For the removal of doubts, it is hereby declared that any expenditure incurred by an ....
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....ied for claiming deduction under Section 37(1) of the Act and held that, in the absence of necessary particulars and supporting evidence, the expenditure claimed could not be allowed as deduction. 19. The submission of the appellant that the recipients were private persons and not Government officials requires consideration. The appellant has proceeded on the basis that Explanation (1) to Section 37(1) of the Act would apply only where payments are made to public servants or persons connected with Government establishments. 20. However, in the facts of the present case, the disallowance has not been sustained merely on the basis of the status of the recipients. The fundamental issue is that the appellant failed to establish the genuin....