Is litigation expenses eligible for income tax exemption?

Up to  CERTAIN LIMIT LITIGATION  EXPENSES ARE ALLOWED AS DEDUCTIONS FROM TAX IN iNDIA.

So far as I understand, litigation expenses are deductible for Corporate entitites towards litigation expenses incurred in course of its business, not for individuals, and definitiely not for matrimonial litigation.

Matriimonial suits are personal in nature. Thus they are not allowed to be taken as deductions fro Gross Taxable Income under section 37(1). But if you get any property from the suit. You can always show the expenses as cost of improvement for calculation of capital gains, if the property is sold.

@Ms.Usha Kapoor: Can u plz name the section and sub-section of the ITR which allow an individual to exempt some taxes from litigation expenses?

@Akash Kapoor: There is no question of getting any property from the matrimonial suit. The Home Loan interest I spoke of is for the apartment I myself bought before marriage.

What an irony -"Matriimonial suits are personal in nature."!! Whereas we are taking the most personal matter (marriage) of our lives in open court in matrimonial suits!! 

We get income tax exemption for doctor's fees, medical expenses, food and grocery expenses, postpaid mobile expenses, even as far as I know the amount paid out as alimony/maintenance is exempted from income tax. So why can't litigation expenses be exempted from income tax, when one has solid evidence of payment? A huge chunk of money really goes out of the pockets of litigants every year. The question is not to you, but to the lawmakers of our country.

Originally posted by : Arunima Saha
	We get income tax exemption for doctor's fees, medical expenses, food and grocery expenses, postpaid mobile expenses, even as far as I know the amount paid out as alimony/maintenance is exempted from income tax. So why can't litigation expenses be exempted from income tax, when one has solid evidence of payment? A huge chunk of money really goes out of the pockets of litigants every year. The question is not to you, but to the lawmakers of our country.

The "exemptions" you get from being taxed are because such matters are your "personal" income or "personal" expenses. The Indian State created by the Constitution lacks competence to tax or regulate matters that are "personal" in nature. If you read Articles 21, 27, 265, 307 of Constitution all read together, you will understand what I am talking about.

Article 21 talks of "personal" Liberty, Article 27 further explicitly confirms personal liberty/ non commercial liberty (flowing into religious freedom) cannot be taxed, Article 265 talks of very limited taxation "authority" of law(subject to right of personal liberty/ non commercial liberty), Article 307 clearly defines the boundaries of "authority" of law for carrying out the purposes of Articles 301 to 304(trade, commerce and intercourse, i.e. commercial matters). Department of Income Tax gets very limited "authority" to tax flowing from Article 307 for matters clearly defined within the four walls of Articles 301 to 304 only and within India. It lacks "authority" to tax matters that fall in domain of "personal" liberty/ non commercial liberty of Article 21. That is why you get exemptions for income or expenses that are "personal". Similarly you get exemption for not requiring "license"(taxation by license) from TRAI(created under "authority" flowing from Article 307) for possession of mobile phone because it is for your "personal" liberty purpose. In other words, TRAI lacks authority/ jurisdiction on your "personal" liberty. Similarly political parties are exempt from income tax because their income does not fall with the meaning of "trade, commerce and intercourse" of Part XIII of the Constitution. In other words it is personal/ non commercial income and State lacks competence to tax non commercial/ personal income. Hope you get the picture now.

Now coming to your question. Your matrimonial litigation expenses ought to come under exemptions because they fall in nature of "personal" expenses. Since I have not read the Income Tax laws deeply in details along with all the Notifications issued by Income Tax department, I will not give specific answer about what Income Tax law says about it at the moment. But you may ask this question to an Advocate specifically dealing with Income Tax laws or file your question via RTI to the Income Tax authority to know the answer to your question. If you get the answer in negative, you may approach High Court to give appropriate directions to Income Tax department because these expenses are "personal" and thus the State lacks competence to tax them.

May also read my replies in the following threads -

1. https://www.lawyersclubindia.com/forum/Difference-between-liberty-and-personal-liberty--140449.asp

2. https://www.lawyersclubindia.com/forum/Rights-of-common-citizen-143284.asp

3. https://www.lawyersclubindia.com/forum/Objections-against-proposed-arms-rules-2015-121734.asp