Man gets tax exemption on ransom paid to kidnapper
Bhopal: In a significant judgement, the
Madhya Pradesh High Court has upheld an income tax tribunal
order allowing a state businessman to claim tax reduction on
the ransom amount paid to get him released from kidnappers.
A two-member bench of the court comprising Justice KK
Lahoti and Justice Vimla Jain in its order of August 23 upheld
the income tax tribunal`s decision allowing a Madhya Pradesh
businessman to claim tax deduction on the ransom paid for his
release from kidnappers.
Sukhanandan Jain who is a Director of a bidi sale and
manufacturing company in Sagar in Madhya Pradesh was kidnapped
by the notorious Raju Bhatnagar gang on August 5, 1987.
The kidnapping took place while Jain was on a trip to
far-flung areas of the Sagar district to purchase tendu
leaves. He was released on August 27, 1987 after a sum of Rs
5.5 lakh was paid to the kidnappers as the police had failed
to rescue him.
Jain filed the amount under `general expenses` and
claimed income tax deduction on it.
The tax assessing officer disallowed this on the
ground that ransom was not an expenditure incidental to
business. The counsel for the revenue department later argued
with the income tax that payment of such an amount was
prohibited by law.
On appeal, the Commissioner Income Tax (Appeal) CIT
(A) however, allowed the claim of the assessee.
The department referred the matter to the Income Tax
Appellate Tribunal (ITAT) which confirmed the finding of the
CIT (A) and dismissed the appeal of the department.
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