ACIT vs. Boots Piramal Health Care Ltd (ITAT Mumbai)

DATE: February 18, 2015 (Date of pronouncement)
DATE: March 16, 2015 (Date of publication)
AY: 2005-06
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S. 29/37(1): Loss due to fraud & financial irregularities has to be allowed in the year of detection

Loss due to fraud and financial irregularities have to be allowed as a deduction in the year of detection. This is in line with the Board circular No.35D(XLVII- 20)(F.No.10/48/65-IT(A-I) dated 24.11.1965. The Hon’ble Supreme Court in the case of Associated Banking Corporation Of India Limited. vs CIT reported in 56 ITR 1(SC) has held that “the loss by embezzlement must be deemed to have occurred when the assessee came to know about the embezzlement and realized that the amount embezzled could not be recovered” . In another decision, the Hon’ble Supreme Court in the case of Badridas Daga V/s CIT reported in 34 ITR 10) (SC) has held that “the losses which have been suffered by the assessee as a result of misappropriation by an employee have (1) which was incidental to the carrying on the business and should therefore be deducted in computing the profit of the business.”

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