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TMI Blog2012 (12) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the income Held that:- Even though the purpose for which the amount was expended may not lead to the commission of an offence, the expenditure by way of payment of interest in excess of the limit imposed under the Kerala Money Lenders Act is prohibited. The grant of interest at the rate an excess of 14% is prohibited. The amount of deduction claimed by the appellant represents money paid as interest in excess of 14%. Therefore, the expenditure is in the teeth of the explanation to Section 37 which is the legal provision applicable. In favour of revenue - I.T.A. No. 42 OF 2004 - - - Dated:- 7-9-2012 - MR. K.M. JOSEPH, AND MR. K. HARILAL, JJ. APPELLANT: BY ADV. SRI. K.R. SUDHAKARAN PILLAI RESPONDENT: R, BY ADV. SRI.JOSE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out as follows: "The respondent, who was carrying on smuggling activity, was apprehended by the Indian police, while crossing the border into Pakistan, and a sum of Rs.65,000/- in currency notes was recovered from his person. On interrogation he stated that he was taking the currency notes to Pakistan to purchase gold there and smuggle it into India. The customs authorities confiscated the currency notes. The income-tax authorities found that the assessee was carrying on the business of smuggling and that he was liable to income-tax on income from that business and such income was assessed to tax. The question was whether the assessee was entitled to deduction under S.10 of the Indian I.T. Act, 1922, of the loss of Rs.65,000/-, arising b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". 2 [Explanation- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.] 6. He would also submit that the payment of excess interest cannot be treated as an offence in an attempt to get over the taboo against deductin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsider a provision like Section 37 with the Explanation. As far as the Explanation is concerned as stated above if expenditure is laid out for a purpose which constitutes an offence or if it is prohibited by law, it cannot be teated as an expenditure for which deduction can be claimed. 9. The right of the assessee to claim deduction will depend upon the express provisions of the Act. The terms of the explanation are clear. In the facts of the case, even though the purpose for which the amount was expended may not lead to the commission of an offence, the expenditure by way of payment of interest in excess of the limit imposed under the Kerala Money Lenders Act is prohibited. The grant of interest at the rate an excess of 14% is prohibited ..... X X X X Extracts X X X X X X X X Extracts X X X X
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