Taxpayers unable to deduct illegal expenditures, facing increased tax burdens.
The article discusses how tax collection is crucial for government funding and how taxpayers sometimes earn income illegally. The Income Tax Act does not distinguish between legal and illegal income, but it does not allow deductions for expenses related to illegal activities like corruption or bribes. Section 37 of the Income Tax Act allows deductions for expenses that are wholly and exclusively for the purpose of business. This can lead to disputes between taxpayers and tax authorities.