Law:

Section:

Section 28, read with section 37(1) of the Income-tax Act, 1961 - Business loss| deductions - Allowable as - Assessee defaulted in delivering levy rice to Food Corporation of India under Rice Procurement (Levy) and Restriction on sale order, 1967 - Consequently, specified quantity of rice was seized and confiscated - Whether loss suffered by assessee resulted due to infraction of law and, therefore, such loss could not be treated as business loss nor as an expense under section 37(1) - Held, yes FACTS Under Rice Procurement (Levy) and Restriction on Sale Order, 1967, the rice-millers in the State were obliged to deliver a specified quantity of their turnover as levy rice to the Food Corporation of India the agent of the State. The assessee defaulted in delivering the levy relevant to the period between 1-11-1972, and 23-2-1973. Thereupon, a specified quantity of rice was seized from the miller and subsequently, after an enquiry, the seized rice was confiscated. The value of the confiscated rice was claimed by the assessee as trading loss or as business expenditure. This claim was rejected by the ITO, AAC and the Tribunal. On reference: HELD The loss suffered by the miller, resulted due to infraction of law and, therefore, under section 28 such a loss could not be treated as a business loss and also not as an "expense" under sub-section (1) of section 37. Note : The case was decided against the assessee. CASES REFERRED TO Haji Aziz & Abdul Shakoor Bros. v. CIT [1961] 41 ITR 350 (SC), Arbind Kumar Debi v. Rex [1949] AIR 1949 All 473, Badridas Dagav. CIT [1958] 34 ITR 10 (SC), CIT v. Piara Singh [1980] 124 ITR 40 (SC), Government of Province of Bombay v. Laxman Govind Deshmuck [1950] AIR 1950 Bom 257, Govind Choudhary and Sons v. CIT [1971] 79 ITR 493 (Orissa), Mahalakshmi Sugar Mills Co.v. CIT [1980] 123 ITR 429 (SC), Maqbool Hussain v. State of Bombay [1953] SCR 730; AIR 1953 SC, Marks & Co. v. CIT [1943] 11 ITR 454 (Mad.), M.S.P. Senthikumara Nadar & sons v CIT [1957] 32 ITR 138 (Mad.), Sewpujanrai Indrasanarai Ltd. v. Collector of Customs [1959] SCR 821 ; AIR 1958 SC 845 and Soni Hinuji Khushalji & Co. v. CIT [1973] 89 ITR 112 (AP). M.J. Swamy…

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