Bipinchandra K. Bhatia vs. DCIT (Gujarat High Court)

DATE: October 16, 2014 (Date of pronouncement)
DATE: November 17, 2014 (Date of publication)
AY: 1999-2000
FILE: Click here to download the file in pdf format
S. 28/ 37(1): Even if the business is illegal, a loss which is incidental to such business has to be allowed u/s 28 and the Explanation to s. 37(1) has no bearing

The assessee claimed a deduction of Rs.40,34,898 on account of gold seized by the Custom Authorities. The Tribunal rejected the claim by relying on the Explanation to s. 37(1) of the Act. The assessee claimed before the High Court that as the loss is incidental to the business carried on, the loss is allowable u/s 28 and the provision of Section 37(1) of the Income Tax Act, 1961 cannot override the provision of Section 28. HELD by the High Court allowing the appeal:

In view of the decision of the Apex Court in the case of Dr. T.A. Quereshi v. Commissioner of Income-tax, 287 ITR 547, the loss which was incurred during the course of business even if the same is illegal is required to be compensated and for the loss suffered by the assessee has to be allowed as a deduction.

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