Loss due to confiscation of Stock by Custom authorities for over-invoicing whether allowable ?
Section 37 of the Income Tax Act
Commissioner of Income Tax –I Ludhiana vs. Ambassador Industrial Corporation (Punjab & Haryana High Court)(ITA no. 199 of 2007)
Where the goods were confiscated due to over invoicing to claim excess DEPB/Export benefits and for such offence & unlawful action penalty was imposed on firm as well as its partners under Customs Act, then loss due to non released goods was not allowable as deduction.
“The goods having been confiscated on account of violation of provisions of the Customs Act, the claim of the assessee in reduction of value of closing stock, would fall as an expenditure incurred for the purpose which is an offence or which is prohibited by law. The same would not be admissible in view of the Explanation to Section 37(1) of the Act.”