TMI Blog1960 (12) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... xtorted the keys of various safes from the manager. The dacoits opened the safes and took away cash amounting to ₹ 1,06,000 and various ornaments etc. which had been pledged with the bank. The assessee claimed as a deduction in computing its income from the banking business for the assessment year 1952-53 the sum of ₹ 1,06,000 which had been taken away from the Ramnagar branch. The Income-tax Officer refused to allow this amount as a deduction on the ground that the loss was not incidental to the business of the bank. This order was confirmed on appeal by the Appellate Assistant Commissioner. The assessee preferred an appeal to the Tribunal and contended that the above sum is admissible as a deduction for the following reasons: (a) that the cash is the stock-in-trade of the banking company and the loss of cash would be admissible as a deduction irrespective of the circumstances in which the loss occurred, and (b) that the loss of cash in the present case was incidental to the carrying on of the banking business and would be admissible as a commercial loss. The same contentions have been advanced before us. From the order of the Income-tax Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case the money had been kept for the carrying on of the business and, therefore, the loss by the dacoity in this case was in the course of business and therefore incidental to it. In the recent case of Badridas Daga v. Commissioner of Income-tax [1958] 34 ITR 10 (SC) it has been laid down that where a claim is made for deduction for which there is no specific provision under section 10(2) whether it is admissible will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and be incidental to it. The loss for which a deduction is claimed must be one that springs directly from the carrying on of the business and is incidental to it, and not any loss sustained by the assessee even if it has some connection with his business. If that is established, then the deduction must be allowed, provided that there is no provision against it, express or implied, in the Act. In that case the appellant carried on business as money-lender, dealer in shares and bullion and as commission agent, through an agent who held a power of attorney which conferred on him large powers of management incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as whether this amount could be allowed as deduction. It was held by the majority of the judges that it could not be. In the judgment of the learned Chief Justice, the law was thus stated: 'If anyone is paid a sum due to him as profits and he puts that in his pocket and on his way home is robbed of it, it would be, I think, difficult to contend that such a loss was incidental to his business. Still more so when he has reached his home and puts these profits in a strong room or some other place regarded by him to be a place of safety. I can well understand that in cases where the collection of profits or payment of debts due is entrusted to a gumastha or servant for collection and that person runs away with the money or otherwise improperly deals with it, the assessee should be allowed a deduction because such a loss as that would be incidental to his business. He has to employ servants for the purpose of collecting sums of money due to him and there is the risk that such servant may prove to be dishonest and instead of paying the profits over to him, convert them to his own use. But I cannot distinguish the present case from the case of any professional man or trader who, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sugarcane cultivators. That was an essential part of the business of the assessee for the sugarcane factory cannot work unless there is a supply of sugarcane. It appears to us that the loss of money in this case is a loss which springs from the statutory necessity of sending money to various purchasing centres, and such a loss is, therefore, incidental to the business carried on by the assessee. To put it differently, the loss of money is a loss connected with or arising out of the business of the assessee, and should, therefore, be taken into account in calculating the 'profits or gains' under section 10(1) of the Income-tax Act for the purpose of computing the taxable income. We have already pointed out that their Lordships of the Supreme Court have fully approved of this case. A loss which is occasioned by a robbery or theft of money which is to be sent under statutory rules is, therefore, a loss which must be taken to be incidental to the business. The Nainital bank Limited is a public company doing banking business and it is governed by the Banking Companies Act, 1949. Under section 24 of the Act the bank has to maintain in cash or gold valued at a price not excee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st that the learned Chief Justice of Madras had in mind a case where the sum stolen was a sum which had come to the assessee as profits. If the sum that the assessee lost by theft constituted his profits then obviously at the moment of the theft the sum could not be considered to be part of the stock-in-trade, but as a sum apart from the business. So far as the money held by an incorporated bank is concerned it cannot be said that it constitutes profits of the bank; it is really the bank's circulating capital. The profits of the year can only be known at the end of the year when the accounts are made up and it is only then that such profits as are earmarked to be distributed could be said to be held outside the stock-in-trade; the undistributed profits ploughed back would however lose their character of profits. Learned counsel for the assessee referred us to the case of Pohoomal Bros. v. Commissioner of Income-tax [1958] 34 ITR 64 (Bom.). In that case the stock-in-trade of the three foreign branches of the assessee were robbed as a result of enemy action. It was argued on behalf of the Income-tax Department that the loss was not incidental to trade and, therefore, could not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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