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Trader pays ransom, gets tax exemption

bhopal Updated: Sep 01, 2011 00:39 IST
Ranjan
Ranjan
Hindustan Times
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If you are kidnapped while on a business trip and pay a ransom to your abductors, you can show the amount as "business expenditure" and get a tax exemption on it.

This according to an August 23 Jabalpur high court order, which upheld the local tax tribunal’s decision to allow a Madhya Pradesh businessman to claim tax deduction on the ransom he paid his kidnappers.

Sukhnandan Jain, director of a bidi sales and manufacturing company in Sagar district, was kidnapped by the notorious Raju Bhatnagar gang on August 5, 1987, while on a trip to buy tendu leaves. After the police failed to rescue him, his family paid a R5.5-lakh ransom after which he was released on August 27 that year.

Jain filed this amount under "general expenses" and claimed income tax deduction on it. The tax assessing officer disallowed it on the ground that a ransom wasn’t "an expenditure incidental to business". The revenue department later argued at the Income Tax Appellate Tribunal that payment of ransom was prohibited by law.

However, the tribunal and the income tax commissioner ruled in favour of Jain. The tribunal, however, referred the matter to the high court for its opinion.

It its order, a two-judge high court bench said, "During his business tour, he was kidnapped. For a period of near-about 20 days after lodging a report with the police, the respondent
waited…"

It added: "Nowhere is it provided that to save the life of a person, if a ransom is paid, it amounts to an offence."

"In these circumstances, we affirm the reasonings of the commissioner of income tax and the Income Tax Appellate Tribunal allowing the aforesaid expenditure as business expenditure."

When HT contacted Jain over telephone on Wednesday, he said he was busy in a meeting and would not be available for comment.