Held that expenses paid as ransom for release of kidnapped person allowable

*While kidnapping is an offense, paying ransom is not; Bar in Explanation 1
to s. 37(1) not attracted
*



The assessee, engaged in manufacture and sale of *bidis*, sent its
whole-time director to a forest area for purchase of tendu leaves. There, *the
director was kidnapped by dacoits and the assessee paid ransom of Rs. 5.50
lakhs to secure his release*. The AO disallowed the claim for deduction of
the said amount u/s 37(1) though the CIT (A) and Tribunal upheld the claim
on the ground of commercial expediency. Before the High Court, the
department relied on the *Explanation to s. 37(1) and argued that
expenditure incurred for any purpose which is an offence or which is
prohibited by law is not allowable as a deduction*. HELD dismissing the
appeal:


*(Click Here To Read More <http://bit.ly/expl_37_1>)*