Section 36, 37 of Income Tax Act, 1961—Disallowance of business expenditure—In the instant case, appeal is preferred by assessee on the following ground—
CIT erred in maintaining disallowance of 31,50,000/- as made by the Ld. A.O u/s 37(1) by treating the earnest money as forfeited by Maruti Suzuki India Ltd as Capital expenditure of the assessee company without properly appreciating the facts of the case, nature of business and submission made before him.

Held that—We are of the opinion that the alleged earnest money was paid by the assessee to Maruti Suzuki India Ltd in its capacity as a person carrying on business and the contract for taking an agency of vehicle manufactured by Maruti Suzuki India Ltd was a business contract entered into with a view to earn profit and it was not made or secure any capital asset or a advantage endeavour in nature. As such the alleged amount though is not covered by the provisions of Section 36(1)(viia) of the Act but certainly it will be allowable u/s 37(1) of the Act. We accordingly allow Ground No.1 raised by the assessee and direct the Ld. A.O to delete the disallowance of 31,50,000/-.[M/S. BHAGIRATH COACH AND METAL FABRICATORS PVT. LTD, C/O M. MEHTA AND CO. VERSUS DCIT 1 (1) , INDORE] [2018] 8 ITCD Online (35) [ITAT INDORE]