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2014 (1) TMI 702 - AT - Income TaxAddition of expenses u/s 37(1) of the Act - expenses incurred for the purpose of an offence Purpose of incurring expenses ignored Held that:- The expenditure was incurred as a professional fees to defend two directors of the assessee company who were arrested under NDPS Act on being found guilty of the offences under the relevant sections of the said Act assessee contended that since the two directors were released on bail, it indicated that they were not at fault - no final order on their conviction or acquittal was passed so far - It shows that the charge is still continuing, which is otherwise an offence under the NDPS Act - there can be no reason for allowing deduction towards such an expenditure which has been incurred for the purpose of an offence prohibited by law, covered within the meaning of the Explanation to section 37(1) of the Act - Mandate of the Explanation is crystal clear that, 'any expenditure' incurred for any purpose which is an offence or which is prohibited by law cannot be allowed as deduction - It does not make any difference, whether expenditure is direct or indirect - So long as there exists a nexus of the expenditure with the offence, it will continue to be hit by the Explanation Decided against Assessee. Disallowance on account of discrepancy in ledgers Account Held that:- The AO made disallowance towards the interest income which was not accounted for by the assessee in its books of account - certain details were promised to be filed by HSBC Bank and ICICI Bank, which appear not to have been filed in time matter remitted back to the AO for fresh adjudication - the assessee proposes to file to show that there was no interest income which was not offered for taxation Decided partly in favour of Assessee.
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