LexDR. T.A. QUERESHI versus COMMISSIONER OF INCOME TAX, BHOPAL
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.... DR. T. A. QUERESHI v. COMMISSIONER OF INCOME TAX, BHOPAL DECEMBER 6, 2006 [S.B. SINHA AND MARKANDEY KA TJU, JJ.] Income Tax Act, 1961-Computation of profits and gains of business/ profession-Assessee engaged in manufacture and selling of heroin-Seizure A B of heroin-Deduction, claim of-Applicability of section 37-Held: Seizure C of heroin formed part of stock in trade of assessee-Thus, entitled to claim deduction as a business loss on account of seizure-Section 37 relates to business expenditure, thus not applicable-Section 37. Jurisprudence-Legal principles vis-a-vis morality-Held: Law is different from morality-Court has to decide cases on legal principles and D not on one's own moral views. The question which arose for consideration in this appeal was whether the assessee could claim that the heroin seized from him formed part of his stock in trade and hence its loss on account of seizure is an allowable deduction as a business loss while computing his profits and gains of E business/profession. Allowing the appeal, the Court HELD: 1.1. The Income Tax authorities recorded a finding that the assessee was engaged in manufacture and selling of heroin. Once such a F finding of fact is recorded, it follows that any loss from such a business is a business loss. The tribunal recorded a finding that the assessee was doing the business of manufacture and sale of heroin and that the heroin seized was the assessee's stock in trade. In view of this finding, the tribunal rightly allowed the assessee's claim of deducting the loss of heroin as a business G loss. (314-G-H; 315-A) 1.2. Section 37 of the Income Tax Act, 1961 has no application to the instant case since section 37 relates to business expenditure, and the instant 311 H 312 SUPREME COURT REPORTS [2006) SUPP. 10 S.C.R. A case does not deal with business expenditure but with business loss. Business losses are allowable on ordinary commercial principles in computing profits. Once it is found that the heroin seized formed part of the stock in trade of the assessee, it follows that the seizure and confiscation of such stock in trade has to be allowed as a business loss. Loss of stock in trade has to be considered B as a trading loss. Thus, the judgment of High Court cannot be sustained and is set aside and the order of tribunal is restored. (315-G-H; 316-A-B) C/Tv. Piara Singh, AIR (1980) SC 1271 and Commissioner of Jncome- Tax v. S.N.A.S.A. Annamalai Chettiar, AIR (1973) SC 1032, relied on. C 2. High Court has adopted an emotional and moral approach rather than a legal approach. The High Court's order that the assessee was committing a highly immoral act in illegally manufacturing and selling heroin is upheld. However, cases are to be decided by Court on legal principles and not on one's own moral views. Law is different from morality. 1315-F-G) D CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5635 of2006. From the final Judgment and Order dated 29.11.2004 of the High Court of Madhya Pradesh (Indore Bench) in LT.A. No. 33/l999. M.L. Verma, Indu Malhotra and Vikas Mehta and Satya Mitra for the E Appellant. F K.P. Pathak, A.S.G., T.A. Khan and B.V. Balaram Das for the Respondent. The Judgment of the Court was delivered by MARKANDEY KA TJU, J. Leave granted. This appeal has been filed against the impugned judgment dated 29.11.2004 passed by the Madhya Pradesh High Court in LT.A. No. 33 of 1999. G Heard learned counsel for the parties and perused the record. The appellant is an assessee. He is a doctor by profession at a place called 'Garoth' in District Mandsaur. On 18.7.1985, CBI sleuths arrested the appellant while transporting a huge quantity of contraband article (the narcotic H drugs heroin) in a Jeep (Jonga) RSO 3592. This led to further raid in his - T. A. QUERESHI '" COMMNR. OF INCOME TAX. BHOPAL [MARKANDEY KA TJU,J.] 3 13 residential premises. In this raid, one clandestine laboratory to manufacture A heroin powder along with several contraband drugs was recovered. All these contraband articles were seized and proceedings under the NDPS Act were initiated against the assessee. We are not concerned with these proceedings. So far as proceedings under the Income Tax Act ~re concerned, with which we are concerned, the assessee-appellant filed his return for the B Assessment Year 1986-87. In this assessment the assessee claimed that since the heroin seized from him forms part of his stock
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