| Case ID |
5ccb3d87-8cb1-4833-a173-9d2ae479e948 |
| Body |
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| Case Number |
Case Referred No. 15 of 1969 |
| Decision Date |
Apr 08, 1971 |
| Hearing Date |
|
| Decision |
The Supreme Court held that the penalty by way of confiscation of contraband gold is not a commercial loss and thus cannot be allowed as a permissible deduction under the Income-tax Act. The court emphasized that the loss must spring directly from the business or trade the assessee carries on and not from actions that are illegal or contravene statutory provisions. The court reaffirmed that while profits from illegal business are taxable, losses incurred due to unlawful activities cannot be claimed as business losses. The Tribunal's decision to disallow the claim of Rs. 56,978 as a business loss was upheld, establishing a clear precedent that infraction of law does not constitute a normal incident of business, and consequently, such losses are not deductible. |
| Summary |
In the case of Soni Hinduji Kushalji & Co. v. Commissioner of Income Tax, the Supreme Court addressed the complexities surrounding business losses incurred from illegal activities. The case revolved around the confiscation of gold worth Rs. 56,978 by customs authorities, which the assessee claimed as a business loss for the assessment year 1963-64. The court clarified that while businesses engaged in illegal activities may generate taxable income, deductions for losses arising from those illegal activities are not permissible under the Income-tax Act. This landmark ruling highlights the distinction between taxable profits and deductible losses, reinforcing the principle that infractions of law cannot be considered a normal business risk. The decision is significant in the realm of tax law, as it underscores the limitations imposed on claims for deductions tied to unlawful conduct, providing clarity for future cases involving similar issues. |
| Court |
Supreme Court
|
| Entities Involved |
Commissioner of Income Tax,
Soni Hinduji Kushalji & Co.
|
| Judges |
Obul Reddi,
Venkateswara Rao
|
| Lawyers |
J.V. Srinivasa Rao,
M.J. Swamy,
P. Ramarao
|
| Petitioners |
Soni Hinduji Kushalji & Co.
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1973 SLD 420 = (1973) 89 ITR 112
|
| Other Citations |
Badridas Daga v. CIT [1958] 34 ITR 10,
Chandrika Prasad Ram Swarup v. CIT [1939] 7 ITR 269,
CIT v. Chakka Narayana [1961] 43 ITR 249,
CIT v. S.C. Kothari [1968] 69 ITR (Guj.),
CIT v. Haji Aziz & Abdul Shakoor Bros. [1955] 28 ITR 266,
CIT v. Mathura Prasad Hardwar Prasad Deoria [1965] 55 ITR 476,
Commissioners of Inland Revenue v. Alexander Von Glehn & Co. Ltd. [1920] 2 KB 553,
Haji Aziz and Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350,
Mahabir Sugar Mills (P.) Ltd. v. CIT [1969] 71 ITR 87,
Maqbool Hussain v. State of Bombay [1953] SCR 730,
Minister of Finance v. Smith [1927] AC 193,
Raj Woollen Industries v. CIT [1961] 43 ITR 36,
Ramaswami v. CIT [1930] AIR 1930 Mad. 808,
Ram Gopal Ram Sarup v. CIT [1963] 47 ITR 611,
M.S.P. Senthikumara Nadar & Sons v. CIT [1957] 32 ITR 138,
Shewpujanrai Indrasanrai Ltd. v. Collector of Customs [1959] SCR 821,
Strong & Co. of Ramsay Ltd. v. Woodifield [1906] AC 448,
Thomas Dana v. State of Punjab AIR 1959 SC 375
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
28
|