1937 (11) TMI 5 - HC - Income Tax

Summary

Issues:
1. Whether the assessee is entitled to deduct two separate sums from his assessment due to a mistake in accounting for the year 1931-32.
2. Whether the assessee can claim a deduction for money stolen from him in the accounting year 1931-32.

Analysis:
1. The High Court judgment addressed the first issue concerning the deduction of two sums by the assessee due to accounting errors in the year 1931-32. The assessee, engaged in separate shop and commission businesses, mistakenly accounted for goods meant for commission sales as shop purchases. Consequently, he paid excess income tax for that year. The Court held that the assessee's claim for deduction in the subsequent year, 1932-33, was not tenable. The proper recourse for the assessee was to rectify the mistake in the original accounting year through the Commissioner of Income-tax. The Court agreed with the Commissioner's decision to disallow the deduction claim for the sums of Rs. 313 and Rs. 700, as allowing the deduction would result in double benefit for the assessee, contrary to the tax laws.

2. The second issue involved the deduction claim by the assessee for money stolen from him in the accounting year 1931-32. The Court rejected the claim, emphasizing that losses due to theft or embezzlement are not allowable deductions under Section 10 of the Income Tax Act. The Court distinguished a previous case where a loss by embezzlement was allowed as a deduction, stating that theft does not qualify as an expenditure incurred for earning profits. The Court highlighted that theft involves involuntary loss, not a legitimate business expense. The judgment clarified that the loss by theft cannot be classified under any permissible allowances listed in Section 10(2) of the Act. Therefore, the Commissioner's decision to disallow the deduction of Rs. 2,365 for the stolen money was upheld by the Court.

In conclusion, the High Court, comprising Sir Courtney-Terrell, CJ, and Agarwalla, J., ruled against the assessee in both issues, upholding the Commissioner of Income-tax's decisions to disallow the deduction claims for accounting errors and stolen money based on the provisions of the Income Tax Act.