Non-Deductibility of Settlement Expenses Under Section 37 of the Income-tax Act, 1961: CBDT Clarifies
The Central Board of Direct Taxes (CBDT) recently made it clear that settlement costs associated with legal violations under certain regulatory laws will not be permitted as business deductions under Section 37(1) of the Income-tax Act, 1961. This is a major step to combat tax evasion and strengthen corporate accountability.