NDLI: The Commissioner of Income Tax Jaipur Vs. Prakash Chand Lunia (d) Thr. Lrs. & Anr.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Income Tax Act 1961
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Income Tax Act, 1961 (43 of 1961)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5 Referred Case 6
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Appeal Allowed
Headnote	Income Tax Act, 1961 – Explanation to s.37(1) – ‘anyexpenditure’ in s.37 – Expenditure/loss incurred for any purposewhich is an offence or prohibited by law, not deductible in terms ofExplanation 1 to s.37 – High Court relying upon the decision ofSupreme Court in Piara Singh case allowed the loss of confiscationof silver bars as a business loss – Sustainability of – Held: Notsustainable – Explanation to s.37(1) provides that any expenditureincurred by the assessee for any purpose which is an offence orprohibited by law is not an allowable business expense – In thepresent case, the main business of the assessee was dealing in silver– His business cannot be said to be smuggling of the silver bars aswas the case in Piara Singh – Assessee was carrying on an otherwiselegitimate silver business and in attempt to make larger profits, heindulged into smuggling of silver, which was an infraction of law –High Court erred in relying upon the Piara Singh case – Impugnedjudgment set aside – Order of the assessing officer, CIT(A) andITAT rejecting theclaim of the respondent-assessee to treat the silverbars confiscated by the customs authorities as business loss restored– Per M.M. Sundresh. J (Supplementing)‘any expenditure’ mentionedin s.37 takes in its sweep loss occasioned in the course of business,being incidental to it – Thus, any loss incurred by way of anexpenditure by an assessee for any purpose which is an offence orwhich is prohibited by law is not deductible in terms of Explanation1 to s.37 – A penalty or a confiscation is a proceeding in rem, andtherefore, a loss in pursuance to the same is not available fordeduction regardless of the nature of business, as a penalty orconfiscation cannot be said to be incidental to any business –Decisions in Piara Singh and Dr. T.A. Quereshi do not lay downcorrect law in light of the decision in Haji Aziz and the insertion ofExplanation 1 to s.37 – Impugned judgment set aside – Finance(No.2) Act 1998 – Income Tax Act, 1922 – ss.10(1), (2).
Judge	Hon'ble Mr. Justice M.R. Shah
Neutral Citation	2023 INSC 416
Petitioner	The Commissioner Of Income Tax Jaipur
Respondent	Prakash Chand Lunia (d) Thr. Lrs. & Anr.
SCR	[2023] 7 S.C.R. 85
Judgement Date	2023-04-24
Case Number	7689-90

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