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TMI Blog2001 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure under section 37(1) of the Income-tax Act, 1961, in the computation of the assessee's income for the assessment year 1974-75 ?" The facts relating to this reference are as under : The assessee is a Hindu undivided family deriving income, inter alia, from sarrafa, money-lending and utensils business. In one shop sarrafa business was carried on, while in the other shop, utensils business was done. The preventive staff of the Customs and Central Excise Department searched both the shops on May 31, 1973. They seized the following things from the two shops : Sarrafa shop Sarrafa shop 1. Cash Rs. 90,960 2. Gold ornaments weighing 1,259 gms. 3. Primary gold 6 gms. Besides some pronotes and books of account were also found and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Income-tax Officer, taking into account the value of the gold and gold ornaments assessed the income of the assessee. The question is whether in the facts and circumstances of the present case, the value of the gold and gold ornaments and cash confiscated by the Customs and Central Excise Department should be taken as a business loss or as an expenditure under section 37(1) of the Income-tax Act, 1961, in the computation of the assessee's income for the assessment year 1974-75. In CIT v. S. C. Kothari [1971] 82 ITR 794 (SC), the assessee claimed business loss but he was not allowed the set-off under the first proviso to section 24(1) of the Indian Income-tax Act, 1922, on the ground that the assessee had entered into illegal transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of trade cannot be described as such because in conducting it he has acted in a manner which has rendered him liable to penalty for an infraction of the law. The Haji Aziz and Abdul Shakoor Bros. case [1961] 41 ITR 350 (SC) was considered and distinguished in CIT v. Piara Singh [1980] 124 ITR 40 (SC). In this case the assessee was assessed on the income in the business of smuggling gold. He claimed deduction under section 10(1) of the Indian Income-tax Act, 1922. The currency notes which he was taking to Pakistan was confiscated by the customs authorities and was liable to be allowable expenditure. The Supreme Court held that if the income from smuggling was treated as income, he was also entitled for business loss from such incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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