Dr. T. A. Quereshi vs Commissioner Of Income Tax, Bhopal

The Supreme Court held that under Section 37 of the Income Tax Act, any expenditure incurred for purposes that are illegal, such as possession of heroin, cannot be claimed as a business loss. The Court affirmed the High Court's decision to set aside the Income Tax Appellate Tribunal's ruling that allowed the deduction of Rs. 2 lakhs for the heroin seized, establishing that illegal activities cannot form part of stock in trade. Consequently, the appeal was dismissed, upholding the prohibition against deductions for illegal expenditures.