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.