Description:
Business expenditure – Deduction while kidnapping is an offence, paying ransom is not – Bar in Explanation 1 to s. 37 (1) not attracted. Where a payment is made by assessee as ransom to secure the release of a kidnapped person, it was held that such payment is not prohibited. The Explanation of s.37(1) provides that 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. It has to be seen whether the expenditure is incurred for any purpose which is an offence or prohibited by law. Accordingly, the Explanation of to s. 37(1) is not applicable and the ransom is deductible as business expenditure.
CIT vs. M/s Khemchand Motilal Jain (MP) (High Court)
Source:
1. www.aiftponline.org
2. AIFTP TIMES Volume.2 No.11.October, 2011. Page No.9.
3. www.itatonline.org
Our Comment:
The amounts paid for release from kidnappers is allowable expenditure if it is for the purpose of the business of the assessee.
