Expenses Incurred to Settle Proceedings Initiated Under SEBI, SCRA, Depositories & Competition Act Are Not Allowable | CBDT

Notification No. 38/2025, dated 23-04-2025

Section 37 of the Act provides for the allowability of expenditure laid out or expended wholly and exclusively for the purpose of business or profession. The Finance (No. 2) Act 2024 amended the Explanation 3 to section 37(1) to provide that any expenditure incurred to settle proceedings related to legal contraventions, as notified by the Central Government, shall not be allowed under section 37(1).

Now the Central Government has notified that any expenditure incurred to settle proceedings initiated with contraventions/defaults under the following laws shall not be deemed to have been incurred for business or profession. Accordingly, no deduction or allowance shall be made in respect of such expenditure.

• The Securities and Exchange Board of India Act, 1992;
• The Securities Contracts (Regulation) Act, 1956;
• The Depositories Act, 1996; and
• The Competition Act, 2002.

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