Amended and updated notes on section 37 of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to General.
Chapter IV (Sections 14 to 59) of the Income Tax Act 1961 deals with the provisions related to computation of total income. Section 37 of IT Act 1961-2022 provides for General.
Recently, we have discussed in detail section 36 (Other deductions) of IT Act 1961. Today, we learn the provisions of section 37 of Income-tax Act 1961 as amended by the Finance Act 2022. The amended provision of section 37 is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 37 of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-37: General
Section 37 (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 assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.
Explanation-2: For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.
Explanation-3: For the removal of doubts, it is hereby clarified that the expression “expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law” under Explanation 1, shall include and shall be deemed to have always included the expenditure incurred by an assessee,—
- (i) for any purpose which is an offence under, or which is prohibited by, any law for the time being in force, in India or outside India; or
- (ii) to provide any benefit or perquisite, in whatever form, to a person, whether or not carrying on a business or exercising a profession, and acceptance of such benefit or perquisite by such person is in violation of any law or rule or regulation or guideline, as the case may be, for the time being in force, governing the conduct of such person; or
- (iii) to compound an offence under any law for the time being in force, in India or outside India.
[Explanation-3 in sub-section(1) of section 37 newly inserted w.e.f. 1-April-2022 by the Finance Act 2022]
Section 37 (2B):
Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.
Sub-section (2), (3), (3A), (3B), (3C), (3D), (4) and (5) of section 37 of IT Act 1961 were omitted.