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Do you know this tax rule!!!

CMA Ankur Pandey (Govt.Job) (4401 Points)

18 November 2011  

While kidnapping is an offense, paying ransom is not an offence and dedutible as business expenditure u/s 37(1).

Facts of the Case:-
The assessee, engaged in manufacture and sale of bidis, sent its whole-time director to a forest area for purchase of tendu leaves. There, the director was kidnapped by dacoits and the assessee paid ransom of Rs. 5.50 lakhs to secure his release. 
The AO disallowed the claim for deduction of the said amount u/s 37(1) though the CIT (A) and Tribunal upheld the claim on the ground of commercial expediency. Before the High Court, the department relied on the Explanation to s. 37(1) and argued that expenditure incurred for any purpose which is an offence or which is prohibited by law is not allowable as a deduction. 

Judgement/Decision:-
While kidnapping for ransom is an offence u/s 364 A of the IPC, the payment of ransom to secure the release of a kidnapped person is not an offense. The payment of ransom is not prohibited by law. 

Accordingly, the Explanation of to s. 37 (1) is not applicable and the ransom is deductible as business expenditure.


 55 Replies

Arniv Sharda (CA Final) (3006 Points)
Replied 18 November 2011

strange

i didnt knew it sir

thanks for sharin

cheers

Vandana Mulchandani (Finance Manager ) (9227 Points)
Replied 18 November 2011

Thank you Ankur sir for the information...really surprised i was unaware of it

1 Like

Rahul (CA Practice ) (1818 Points)
Replied 18 November 2011

Thanks Ankur, Can you please let me know the year of this judgement as well as name of  the case law.

Thanks in Advance

1 Like

tanmoy roy (Assistant) (102 Points)
Replied 18 November 2011

thank u 4 da information,

CMA Ankur Pandey (Govt.Job) (4401 Points)
Replied 18 November 2011

Originally posted by : Rahul

Thanks Ankur, Can you please let me know the year of this judgement as well as name of  the case law.

Thanks in Advance

 

 

 

CIT vs. M/s Khemchand Motilal Jain (Madhya Pradesh High Court)

 

Please Note this also

Note: Impliedly, Pranav Construction 61 TTJ (Mum) 145 while held (pre-Expl to s. 37(1)) that payment of hafta(protection money) to taporis is allowable as a deduction is still good law

2 Like

jonesmith (MD) (28 Points)
Replied 18 November 2011

Thank you Ankur sir for the information...really surprised i was unaware of it

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 18 November 2011

Nice sir ...u Rock ...please keep sharing 

1 Like

CMA Ankur Pandey (Govt.Job) (4401 Points)
Replied 18 November 2011

Originally posted by : sivaram

Nice sir ...u Rock ...please keep sharing 

 

 

Its Great to See Comments from  a such genius

veera (searching) (52 Points)
Replied 18 November 2011

nice judgment

Ranotosh Podder (ca student) (394 Points)
Replied 18 November 2011

thanks for sharing this interesting judgement

APOORV SAXENA (Chartered Accountant) (794 Points)
Replied 18 November 2011

thanxx a lot for sharing !!

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 18 November 2011

Originally posted by : cma.ankur




Originally posted by : sivaram






Nice sir ...u Rock ...please keep sharing 




 





 

Its Great to See Comments from  a such genius

I thought not to spoil the Forum in between so not commented can we take this comment from You as the best joke for the calender Year 2011 since the Year coming to an end ?

1 Like

CMA Ankur Pandey (Govt.Job) (4401 Points)
Replied 18 November 2011

CMA Ankur Pandey (Govt.Job) (4401 Points)
Replied 18 November 2011

@  sivaram

smileysmiley

This show  How Humble u are....smiley

Sorry i will not allow to take my comment as JOkeangry


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