General
Section 37 of the Income-tax Act, 1961 deals with general. 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 i The Act came into force on 01 Apr 1962. Repealed by the Income-tax Act, 2025 with effect from 1 April 2026, but conduct before that date is still charged, tried and appealed under it.
(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; or (iv) to settle proceedings initiated in relation to contravention under such law as may be notified by the Central Government in the Official Gazette in this behalf.] (2) [***] (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.
(3) [***] (3A) [***] (3B) [***] (3C) [***] (3D) [***] (4) [***] (5) [***]
Section 37, The Income-tax Act, 1961 (Act 43 of 1961).
Now in the Income-tax Act
INCOME-TAX-ACT-2025 34 General conditions for allowable deductions Official correspondence
Measured by comparing the text of the two provisions, not taken from an official correspondence table — there is no machine-readable one. See both texts side by side before relying on it.
Both regimes are live. The repealed enactment still governs what happened while it was in force. We never redirect one to the other.
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
This section refers to
Referred to by 17
- Finance Act s. 4 Amendment, of section 37
- Finance Act s. 9 Amendment of section 37
- Finance Act s. 6 Amendment of section 37
- Finance Act s. 10 Amendment of section 37
- Finance Act s. 9 Amendment of section 37
- Finance Act s. 8 Amendment of section 37
- Finance Act s. 7 Amendment of section 37
- Finance Act s. 10 Amendment of section 37
- Finance Act s. 17 Amendment of section 37
- Finance Act s. 11 Amendment of section 37
- Finance Act s. 15 Amendment of section 37
- Finance Act s. 8 Amendment of section 37
and 5 more
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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C. I. T-i vs Tatyasaheb Kore Warana S. S. K. LTD
Court's Decision & Legal Precedent
When a cooperative sugar society pays sugarcane purchase price comprising both cost and profit elements as determined by State Government under Clause 5A of the Sugar Cane Control Order, 1966, the entire amount is not automatically disallowable as profit distribution. Instead, the Assessing Officer must undertake a detailed exercise to identify what portion represents legitimate cost of procurement and what portion represents profit component to be shared with growers. Only the profit component portion identified through analysis of the mechanism of SAP determination, accounting records, and formula application (as per Second Schedule) should be treated as appropriation of profit and included in taxable income, while the remainder is deductible as business expenditure under Section 37 of the Income Tax Act.
On this section: Disallowance of expenditure if excessive and unreasonable or in contravention of law; applied to determine whether excess cane purchase price is allowable as business expenditure or disallowable as excessive
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C. I. T. , Pune vs Mula Sahakari Sakhar Karkhana LTD
Court's Decision & Legal Precedent
To the extent of the profit component which forms part of the final determination of SAP/additional purchase price fixed under Clause 5A of the Sugar Cane Control Order 1966, the same is and/or can be said to be an appropriation of profit and is non-deductible. However, the entire/whole amount of difference between SMP and SAP per se cannot be said to be an appropriation of profit. The Assessing Officer must undertake a detailed exercise by calling upon the assessee to produce statements of accounts, balance sheet, and material supplied to the State Government for deciding/fixing the final price/SAP, to determine what amount would form part of profit. Only the profit component is to be treated as sharing/distribution of profit (non-deductible), while the rest is deductible as expenditure. For amounts paid to non-members above SAP, Section 40A(2) reasonableness test applies.
On this section: Disallowance of excessive and unreasonable expenditure incurred in course of business
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Pr. Commissioner of Income Tax v. IBM India Pvt. Ltd.
Court's Decision & Legal Precedent
DATE VERIFIED Final Order 17.01.2025 (order-1.pdf text dated 17th January 2025): Karnataka HC dismissed Revenue’s appeal, following CIT LTU v. Biocon Ltd. — ESOP discount (grant price vs market price) is allowable under s.37(1); the section does not require cash payout and permits deduction of discount over the vesting period consistent with SEBI ESOP guidelines.
On this section: s.37 — ESOP discount as allowable business expenditure (Biocon line).
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Pr. Commissioner of Income Tax v. SAP India Pvt. Ltd.
Court's Decision & Legal Precedent
DATE VERIFIED Final Order 19.08.2024 (order-1.pdf text dated 19th August 2024): Karnataka HC dismissed Revenue appeal challenging allowance of ESOP cost. Once Biocon settles that ESOP discount is allowable under s.37(1), Revenue cannot reopen that proposition of law as a substantial question; appeal not admitted.
On this section: s.37 — ESOP cost/discount allowability affirmed (SAP India / Biocon).
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JBM Industries Ltd. v. Commissioner of Income Tax, New Delhi
Court's Decision & Legal Precedent
DATE VERIFIED Final Order 30.09.2019 (order-2.pdf): Delhi HC upheld concurrent disallowance of ~₹70 lakh overseas MBA spend on a newly inducted 18-year-old director’s daughter. s.37(1) requires expenditure wholly and exclusively for business; personal/family education passed off as company training fails the nexus/commercial-expediency test where sponsorship evidence is missing and the service bond is farcical (Kostub distinguished; Natco Exports followed).
On this section: s.37 General — wholly & exclusively business expenditure; director-relative foreign education claims.
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The Commissioner of Income Tax - Central Ii Mumbai vs Shah Rukh Khan
Court's Decision & Legal Precedent
The definition of 'commercial vehicle' for the purpose of claiming 50% depreciation under Rule III(2)(iid) of Appendix I of the IT Rules includes any motor car with an unladen weight not exceeding 7,500 kilograms, irrespective of its personal registration.
On this section: Business expenditure versus personal/capital expenditure.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 37
What have the courts held on Section 37 of the Income-tax Act?
C. I. T-i vs Tatyasaheb Kore Warana S. S. K. LTD (05 Mar 2019) is the leading judgment on this section among those set out below: Disallowance of expenditure if excessive and unreasonable or in contravention of law; applied to determine whether excess cane purchase price is allowable as business expenditure or disallowable as excessive. Another 5 judgments on this section are set out below, 2 of them from the Supreme Court. They run from 2011 to 2025.
How do I find court cases under Section 37 of the Income-tax Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Income Tax Act 37, section 37 Income Tax Act, section 37 of the Income-tax Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 6 reported judgments on this section are set out on this page, beginning with C. I. T-i vs Tatyasaheb Kore Warana S. S. K. LTD (05 Mar 2019).
What should I read with Section 37 of the Income-tax Act, and has it changed?
Its own text turns on Companies Act 135 (Corporate Social Responsibility), section 30 (Rent, rates, taxes, repairs and insurance for buildings), section 36 (Other deductions), so none of them can safely be read on its own. 17 other provisions in this corpus refer back to it. For anything done on or after 1 April 2026 the provision to read is Income-tax Act, 2025, section 34 (General conditions for allowable deductions), which replaced it; conduct before that date is still charged, tried and appealed under this section.
When did Section 37 of the Income-tax Act come into force?
Section 37 of the Income-tax Act, cited as Income Tax Act 37, came into force on 01 Apr 1962, having been enacted on 13 Sep 1961. It is no longer in force.
Other sections of this Act
- 10. Incomes not included in total income30885 words
- 2. Definitions11419 words
- 80HHF. Deduction in respect of profits and gains from export or transfer of film software, etc7148 words
- 80-IB. Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings5474 words
- 155. Other amendments5451 words
- 139. Return of income5400 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Recovered from the consolidated text published by the Income Tax Department, as amended by the Finance Act, 2026. India Code holds no record of this Act in any form. This page is not a substitute for legal advice.