The CBDT notified that any expenditure incurred for settling proceedings initiated in respect of a contravention or default under four specified laws shall not be deemed to be incurred for the purpose of business or profession.
If you are a taxpayer then this news is important for you. In fact, the Income Tax Department said on Thursday that taxpayers will not be allowed to deduct the expenses incurred to settle the proceedings initiated under four laws including SEBI and Competition Act. According to PTI news, in a notification issued on April 23, it has been told that the Central Board of Direct Taxes (CBDT) notified that any expenditure incurred to settle the proceedings initiated in respect of violations or defaults under four specified laws will not be considered to be incurred for the purpose of business or profession. No deduction or allowance will be given for such expenditure.
These are the four laws
According to the report, these four laws are – Securities and Exchange Board of India Act, 1992; Securities Contracts (Regulation) Act, 1956; Depositories Act, 1996; and Competition Act, 2002. Amit Maheshwari, Tax Partner at AKM Global, said that the deduction of settlement payments under Section 37(1) of the Income Tax Act, 1961, has long been a subject of judicial debate, especially in cases like Income Tax Officer vs Reliance Share and Stock Brokers (P.) Ltd., where consent fees paid to SEBI were allowed as business expenses on the basis of business convenience.
Any expenditure not eligible for deduction
The CBDT amended the law through the Finance Act, 2024 and has now notified that any expenditure incurred for settlement or compromise of proceedings under specific laws, including the SEBI Act, Securities Contracts (Regulation) Act, Depositories Act and Competition Act, whether in India or abroad, will not be eligible for deduction.
This effectively repeals earlier tribunal decisions and brings much-needed clarity to the tax landscape, although ambiguities remain under other regulatory laws such as FEMA and RBI directions, Maheshwari said.
Related Articles:-
No lock-in period, No penalty FD… withdraw it from ATM whenever you want
