Law: Income Tax Act, 1922

Section: 10(1)

JUDGMENT Tek Chand, J.-The question of law referred to the High Court by the Income-tax Appellate Tribunal, Delhi Bench, in this case is : "Whether, on the facts and in the circumstances of the case, the loss of Rs. 9,300 arose in the ordinary course of, and incidental to, the assessee's business and was, as such, a trading loss under section 10(1) of the Income-tax Act allowable in computing the business income ?" The assessee is a registered firm of two partners with its head-office at Beri in Rohtak district and with branches in several places including the one at Calcutta. This firm used to transact business in foodgrains and other agricultural products on commission agency basis. The Calcutta branch earned a net commission amounting to Rs. 58,246 in the assessment year 1956-57 for which the accounting year ended on 13th November, 1955. Prabhu Dayal was an employee of the assessee's Calcutta branch and was sent with a sum of Rs. 9,300 in cash on 13th November, 1955, to the Punjab National Bank Limited, Bara Bazar branch, Calcutta, for depositing the sum in the account of the assessee firm. A thief snatched from Prabhu Dayal the bundle containing the money and consequently a report was lodged with the police authorities. The culprit could not be traced and in the assessee's books of account the amount of Rs. 9,300 was written off for the reason that the sum had been stolen. In the income-tax return the assessee firm claimed the amount as a trade loss. The Income-tax Officer in his order dated 23rd February, 1957, said that the assessee had failed to prove that the amount involved was necessarily for business purposes. Therefore, in the absence of any evidence produced by the assessee, he treated the amount as capital loss and added back Rs. 9,300. The assessee was unsuccessful in his appeal before the Appellate Assistant Commissioner and again before the Income-tax Tribunal. The Appellate Assistant Commissioner expressed the view that the assessee had lost the cash which was not the stock-in-trade and, therefore, was not a revenue loss suffered. He did not disagree with the Income-tax Officer that the loss was not accidental and in the ordinary course of the…

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