Tax On illegal Income

The One Says:

The One had similar queries once and got the following answers from a reputed tax consultant.

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[*]YES, Illegal income is taxable! It is usually under "Income from Other Sources" / "Business Income"

Expenditure against illegal income is not allowed as deduction since there is no provision for such expenditures to be allowed as deduction. However the Supreme Court in the case of CIT vs Pyara Singh laid down that "in respect of an illegal business any expenditure incurred or laid out wholly and solely for the purpose of business is deductible"

The Income Tax Act does not make any distinction between illegal income or legal income. Income (any income) is taxable.

Finally I am not sure about the last one. I think that basic exemption limit is not allowed on public policy grounds otherwise it would tantamount to encouraging illegal activities. However considering the above mentioned judgment any thing seems to be possible!!
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Sir,

 I am of the opinion that " whatever expenditure incurred for earning income is allowable expenses " is a guiding principal of Income tax. It does not descriminate illegal income as was dedided by the Apex Court in case of CIT v Pyarasingh. it is but natural that if there is no differancefor taxability between legal and  illegal income, ithere is no reason for differant treatment for its expenses, unless it is specifically provided for it the Act

CA K D Parekh Email : kdpco2007 @ gmail.com