Meaning of “Enduring Benefit/Rights of a Permanent Nature”

The meaning of enduring benefit/rights of a permanent nature under section 37(1) of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble High Court tried to explain the meaning of enduring benefit/rights of a permanent nature.

Meaning of enduring benefit/rights of a permanent nature

The phrase ‘enduring benefit/rights of a permanent nature’ used in section 37(1) of the Income Tax Act came up before Hon’ble Supreme Court in Devidas Vithaldas & Co. Vs. CIT [1972] 84 ITR 277 (SC) and it explained.

Meaning : The expressions, ‘enduring benefit’ and ‘rights of a permanent nature’, are only descriptive and not definite and are relative in meaning, not synonymous with perpetual or everlasting.

Although an enduring benefit need not be of an everlasting character, it should not, at the same time, be transitory or ephemeral, so that it can be terminated at any time at the volition of either of the parties. What the extent of durability or permanence should be, depends on the facts of each case.

Section 37(1) of Income Tax Act

General.

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.

(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) [***]

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In this article, you can get guidance from high courts on the meaning of enduring benefit/rights of a permanent nature under section 37(1) of the Income Tax Act.

Updated up to Finance Act 2021