In Brief
The Supreme Court reversed the High Court's decision allowing an assessee to claim confiscation of silver bars as a business loss. Though the assessee was engaged in a legitimate silver trading business, the confiscated silver was smuggled goods, resulting from an infraction of customs law. The Court held that confiscation—a proceeding against the property itself (in rem)—cannot be treated as a commercial loss incidental to legitimate business. The decision in CIT v. Piara Singh, which allowed such deductions where smuggling itself was the business, was distinguished. Section 37(1) of the Income Tax Act, with Explanation 1, disallows deductions for expenditures incurred for illegal purposes. Appeals allowed, High Court judgment set aside.
The lawyer headnote and full judgment text are available to registered users.