TMI Blog1970 (11) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... and his companion, Chain Singh, were apprehended by the police on the Indo-Pakistan border on the night between 19th and 20th September, 1958. They were moving towards a village, Sarja Mirja, on the Pakistan side. On search, an amount of Rs. 65,500 in currency notes was recovered from the person of Piara Singh and a sum of Rs. 69,800 from the person of Chain Singh. On interrogation, both these persons stated on 20th of September, 1958, that they were taking the currency notes out of India to Pakistan with a view to smuggle gold which had to be purchased in Pakistan and brought into India. They admitted that they were doing so through the assistance of one Rehmat, a Pakistani smuggler. A notice was consequently served on Piara Singh, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 was to be treated as his income, it should be treated as the income of the whole gang and not his exclusive income. It was further maintained that, even if this contention was not accepted, the entire amount of Rs. 60,500 could not be held to be the income of the year under appeal and the amount could very well have included income earned by him in the previous years. Only the income earned during the relevant year could be considered for purposes of assessment. As a last resort, it was contended that the amount that was confiscated, namely, Rs. 65,500, was lost in the business activities of smuggling and, therefore, was an allowable deduction under section 10(1) of the Income-tax Act. The stand taken up by the revenue before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consisted of taking out of India currency notes and exchanging them with gold in Pakistan and smuggling that gold into India. As the hazard of losing the money with which the gold had to be acquired was inherent in the activity, any confiscation of that amount would be a loss and thus allowable deduction within the meaning of section 10(1). The Tribunal upheld the assessee's claim on the basis of the amount of Rs. 65,500 being a permissible deduction within the meaning of section 10(1) of the Act. The department was dissatisfied with this decision and moved an application under section 256(1) of the Income-tax Act, 1961, and only one question of law has been stated as already referred. The question whether the income of the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (xv) and that claim was disallowed by the Bombay High Court, the reason being that under no circumstances the amount could be said to be expended for the acquisition of goods. The goods had already been acquired. They had been confiscated and the amount expended was to get the goods released. This is not so in the case in hand. The currency notes, which were recovered from the assessee, were being taken by him to Pakistan to acquire gold. The income would only arise if that gold was sold in the Indian market and a profit derived therefrom. This amount merely represented an amount with which gold of the corresponding value had to be acquired in Pakistan, of course, for purposes of making profits but that stage did not arise. There is no ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax, have been considered. So far as the last three authorities are concerned, they are similar to the Bombay decision which we have already dealt with. There is no dispute with the view which the authorities have taken on the facts on which the Bombay decision proceeded. The present case has no parallel with the facts of the Bombay decision. It has only a parallel with the facts in S. C. Kothari's case. The relevant passage from S.C. Kothari's case is reproduced below : " These decisions clearly show that even where a trade is illegal, it would still be a trade within the meaning of the Income-tax Act and if any profits are derived from such trade, they would be assessable to tax under the Income-tax Act. The assessee ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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