Krishn Kumar Lahoti, J.

1. This is a reference by the Income Tax Appellate Tribunal, Jabalpur in R.A. No. 20(Jab)1995 by which the Tribunal has referred following question for the answer of this Court.

Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the amount of Rs. 5,50,000/-paid as ransom money to the kidnappers of one of the Directors was an allowable deduction under Section 37(1) of the Income-tax Act, 1961

2. Facts of the case are that the Assessee is a private limited company The main income of the company was from manufacturing and sale of bidis. Sukhnandan Jain was a whole time Director of the Assessee company. He was looking after the purchase, sales and manufacturing of bidis.

3. On 5.8.1987 Sukhnandan Jain had gone to Sagar for purchase of tendu leaves. On the same day, he was kidnapped for ransom by a dacoit gang headed by Raju Bhatnagar. Immediately complaint and FIR were lodged with Sagar Police. The Assessee awaited the action of the police. The police were unsuccessful to recover Sukhnandan Jain from the clutches of dacoit. Ultimately a sum of Rs. 5,50,000 was paid by way of ransom for the release of Su