Loss arising on account of illegal business :

Official answer key: (A), (B). Official source note: There is no specific provisions in the Income tax Act, 1961 or the Rules 1962, allowing / disallowing set of loss of illegal business from profits of legal business. Further, According to the judgment passed by the Supreme Court, loss of illegal business can be set off and carried forward against the profit of legal business, if so claimed by assessee. [T.A. QUERESHI vs. COMMISSIONER OF INCOME TAX - SC]. Therefore both option A or B can be considered as correct.