Delhi High Court: Proceeds of Crime in Money Laundering Cases Not Taxable Under Income Tax Act

The Delhi High Court has ruled that proceeds of crime in money laundering cases cannot be treated as taxable income under the Income Tax Act, as the Prevention of Money Laundering Act (PMLA) takes precedence.

The ED said that over two lakh investors were cheated of nearly ₹494 crore, and the seized money was part of the criminal proceeds under investigation.

It further stressed that the PMLA, enacted after the Income Tax Act, overrides earlier laws in cases involving money laundering.

After considering the case, the High Court ruled in favour of the ED. The court held that allowing taxation would legitimise illegal gains and undermine the PMLA’s objective of confiscating illicit wealth.

[Asst. Commissioner of Income Tax v. State & Ors]