1976 (3) TMI 82 - AT - Income Tax

Summary

Issues: Allowability of loss on account of theft as a deduction from the assessee's income.

In this case, the only issue at hand is whether the loss on account of theft suffered by the assessee, who is a dealer in coconuts, can be allowed as a deduction from the assessee's income. The theft occurred when a burglar removed cash from the business premises of the assessee to the extent of Rs. 5,840. The Income Tax Officer (ITO) disallowed the claim, considering it a capital loss and doubting its genuineness. The Appellate Assistant Commissioner (AAC) also upheld the ITO's decision. However, upon reviewing the complaint filed by the assessee before the Inspector of Police, the Income Tax Appellate Tribunal (ITAT) found no doubt that the assessee indeed suffered the loss. The key question was whether this loss could be allowed as a deduction from the assessee's income.

The Departmental Representative relied on a decision of the Andhra Pradesh High Court in a similar case and argued that the loss should not be allowed. The ITAT carefully considered the matter and referred to a decision by the Supreme Court in the case of CIT vs. Nainital Bank Ltd. The Supreme Court in that case had held that a loss caused by dacoity to a banking company, where money was stock-in-trade, would be allowable. The ITAT noted that the Supreme Court did not base its decision solely on the fact that cash was stock-in-trade for the bank but discussed the principles applicable to cases of loss caused by robbery or dacoity. They also referred to decisions from the Australian High Court and New Zealand High Court, quoting the New Zealand High Court's opinion that there should be no distinction in principle between a robbery on the premises and a robbery while the money was in transit to the bank.

Based on the principles laid down by the Supreme Court in the Nainital Bank case, the ITAT concluded that the loss claimed by the assessee should be allowed. They found that the amount lost was part of the funds necessary for the assessee's business requirements, as he had to pay cash to agriculturists for the purchase of agricultural products. The fact that the theft occurred in the business premises where the cash was kept, and that the assessee was sleeping there at the time, did not change the nature of the loss. Therefore, the ITAT allowed the appeal, ruling in favor of the assessee.