TMI Blog1967 (12) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... gar. The assessment year is 1959-60, the previous year being the year ending October 31, 1958. The Tribunal has found that a theft was committed on November 10, 1957, at 3 o'clock of the morning in the factory premises of the assessee and a sum of Rs. 75,031 was stolen. A certain amount was recovered from the thieves, who included an employee of the assessee, but the sum of Rs. 53,121 remained untraced. It accepted the case of the assessee that large sums of money were necessary at the factory for conducting its day to day business, that on the eve of commencing sugarcane crushing, a large sum in cash had to be kept available at the factory for despatching funds to different centres to enable the purchase of sugarcane and for meeting othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax law. The law governing a claim to deduction under sub-section (1) of section 10 was clearly enunciated by the Supreme Court in Badridas Daga v. Commissioner of Income-tax in the following terms : "...... when a claim is made for a deduction for which there is no specific provision in section 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles can be said to arise out of the carrying on of the business and to be incidental to it. If that is established, then the deduction must be allowed, provided of course there is no prohibition against it, express or implied, in the Act. " Therefore, we are here concerned with the question whether the loss of Rs. 53, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of business expenditure. Now, it is important to note that the money which was stolen has been found by the Tribunal to form part of the fund maintained for business expenses. There is no material, so far as we know, that the profits earned in the business formed part of that fund. Nor is there any suggestion that any part of the fund was diverted to expenditures not connected with the assessee's business. In Badridas Daga's case , the Supreme Court held that a loss resulting from embezzlement by the agent of a firm who enjoyed large powers of management including authority to operate on bank accounts, and who withdrew the moneys in the purported exercise of that authority, was a loss incidental to the carrying on of the business and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The distinction drawn by the Supreme Court in Commissioner of Income-tax v. Nainital Bank Ltd. is relevant here. The Nainital Bank Ltd., a public limited company, carried on the business of banking. At 7 o'clock an evening in June, 1951, there was a dacoity in the bank resulting in the removal of a large amount of cash kept in the safes at a branch at Ramnagar. The bank claimed a deduction of the amount in the computation of its business profits under sub-section (1) of section 10. The claim was resisted by the revenue, one of the submissions being that the loss was suffered after business hours and was, therefore, not incurred in the running of business. It was urged that the loss was one to which all owners of properties are exposed, whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The retention of money in the bank premises carries with it the ordinary risk of its being subject of embezzlement, theft, dacoity or destruction by fire and such other things. Such risk of loss is incidental to the carrying on of the operations of the business of banking. " Here, in the instant case, we have an assessee who finds it necessary for the purposes of its business to withdraw from the bank and lodge in the factory safe-room a sufficient amount of money for paying out to canegrowers and for meeting other business expenses. There is no mixing of the money with profits earned by the assessee or with private funds. It is money appropriated, as it were, to business expenditure. It is money which, upon withdrawal from the bank, has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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