A matter was raised with the Allahabad High Court, where the respondent was claiming bribe as business expense
Shriya Mishra | Jun 10, 2025 |
Can I Claim Bribe as a Business Expense in ITR Filing?
The Allahabad High Court dealt with this case in one of it’s Judgements; The case revolved around the disallowance of certain business expenses claimed by the assessee. Respondent used to supply ayurvedic medicines in hospitals. He challenged the Income Tax Department‘s disallowance of commissions paid to government doctors. The essence of this whole dispute was if such payments, alleged as illegal gratification or bribes, could be considered as legal business expenses under Section 37 of the Income Tax Act, 1961.
Respondent claimed business expenditure worth Rs. 2,46,254 including Rs.1,08,678 were paid to government doctors so that they would prescribe his ayurvedic medicines to patients. The Commissioner of Income Tax allowed payment of commission to private doctors; it restricted paying such amounts to government doctors, making it an illegal gratification or bribe.
The Tribunal had previously affirmed his claim for the government doctors’ commissions, acknowledging it as a business necessity. Though the Allahabad High Court overturned this decision, stating that payments to government doctors violated public policy and legal provisions against bribery, forbidding them as allowable business expenditures under Section 37.
The court stated, “Label it a commission or fee, but if it’s a bribe, it’s not deductible-no matter how necessary it seems.”
This decision by the Allahabad High Court emphasised the fact that tax laws are non-negotiable in any circumstance. The judgement is a pivotal reminder to every business operating in India that they must uphold ethical principles and follow the legal framework in a stern and responsible manner to ensure the correctness of their financial practices.
Claim of such expenses can consequently lead to penalties, disallowance, or prosecution.
The Judgement is given below for your referance:
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