Redemption fine for excise law breach is not deductible as business expenditure when linked to unlawful conduct.

Redemption fine paid to secure release of confiscated goods for breach of excise law was treated as a consequence of unlawful conduct, not as an expense incurred wholly and exclusively for business. The governing principle is that a payment arising from infraction of law, including a penalty-linked redemption amount, is not deductible merely because it was incurred during business operations. The amount was therefore held not allowable as business expenditure, with the issue answered in favour of the Revenue.

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Issues: Whether the redemption fine paid for release of confiscated goods on account of infraction of law is allowable as business expenditure.

Analysis: The amount in question was paid in consequence of violation of excise law and not for the purpose of carrying on the business. Expenditure incurred to evade or compound the consequences of unlawful conduct cannot be treated as a commercial expense or as a sum laid out wholly and exclusively for business. The governing principle applied is that a payment arising from breach of law, including a penalty or redemption amount linked to such breach, is not deductible merely because it was incurred in the course of business.

Conclusion: The redemption fine was not allowable as business expenditure and the question was answered in favour of the Revenue.

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