The government is considering a change in the income tax provisions to allow any payment towards overseas dispute settlement as business expenditure. “A proposal in this regard is being examined,” said an official.
Any payment made towards settlement of overseas disputes or to prevent litigation for offences that are not serious or criminal in nature could be treated as a business expense and allowed as a deduction, the official said, adding that changes are being examined in Section 37 of the Income-Tax Act.
This has been a long-pending demand of the industry.
No deduction is allowed if such an expenditure is made for settlement and paying for penalty or legal compensation overseas.
Section 37 of the Act provides that an expenditure incurred wholly and exclusively for the purposes of business is tax deductible, provided it is not incurred for any purpose that is an “offence” or for any purpose that is “prohibited by law”. Last year, the Centre in the Finance Act said this shall include expenditure incurred by an assessee either in India or outside India.
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