Mr. A, an individual derived income of ₹1,00,000 from illegal activities related to the business during the financial year 2020-21. He has incurred expenses of ₹50,000 to earn above income. What is the tax treatment of t

CS Executive · Tax Laws and Practice · PYQS · December 2021
Mr. A, an individual derived income of ₹1,00,000 from illegal activities related to the business during the financial year 2020-21. He has incurred expenses of ₹50,000 to earn above income. What is the tax treatment of the above transaction for the assessment year 2021-22?
(A) ₹50,000 chargeable to tax in income from other sources
(B) ₹50,000 chargeable to tax in income from business and profession
(C) ₹1,00,000 chargeable to tax in income from business and profession
(D) It is not chargeable to tax as the person who carried on the illegal activities is punishable under the appropriate law

Answer & Explanation:

Correct Answer: Option (B)

Official answer key: (B), (C). Official source note: Option B is correct if expenses would be considered as legal expenses. Option C is correct if expenses would be considered as illegal expenses.

Topics: Income Tax Act, 1961

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