1992 (1) TMI 190 - AT - Income Tax

Summary

Issues Involved:

1. Entitlement to revenue deduction for the loss by theft.
2. Quantum of deduction admissible.
3. Treatment of recovered amounts and articles.

Detailed Analysis:

1. Entitlement to Revenue Deduction for the Loss by Theft:

The assessee, a registered firm, claimed a revenue deduction for the entire amount of Rs. 10,75,500 stolen from its Porbandar office. The Assessing Officer denied this claim, arguing that since part of the stolen money (Rs. 5,57,404) and articles worth Rs. 1,02,439 were recovered, the loss could not be considered final. The CIT(A) partially agreed with the assessee, allowing a deduction for the unrecovered amount only (Rs. 4,14,656).

The Tribunal noted the development of case law, highlighting that losses by theft are now generally considered revenue deductible, citing the Supreme Court's decision in Ramchander Shivnarayan vs. CIT. The Tribunal concluded that the assessee is entitled to a revenue deduction for the loss incurred due to the theft, as the loss arose during the relevant previous year.

2. Quantum of Deduction Admissible:

The main contention was whether the assessee should be allowed a deduction for the entire stolen amount or only the unrecovered portion. The CIT(A) had restricted the deduction to Rs. 4,14,656, considering the recovered cash and articles. The assessee argued that the recovered amounts were not final and were subject to the outcome of ongoing legal proceedings.

The Tribunal agreed with the assessee, noting that the recovered sum of Rs. 5,57,404 was released conditionally and was not a final receipt. The Tribunal drew a parallel with the Supreme Court's decision in CIT vs. Hindustan Housing and Land Development Trust, where a contingent receipt was not considered for deduction purposes. Therefore, the Tribunal held that the entire stolen amount of Rs. 10,75,500 should be allowed as a deduction.

3. Treatment of Recovered Amounts and Articles:

The Tribunal addressed the status of the recovered cash and articles. The sum of Rs. 5,57,404 was released to the assessee on furnishing solvent sureties, but the ownership of this amount was still under dispute. The articles worth Rs. 1,02,439 were still in police custody and had not been released to the assessee.

The Tribunal concluded that since the recovered amounts and articles were not definitively returned to the assessee, they should not be offset against the stolen amount for deduction purposes. Consequently, the Tribunal directed the Assessing Officer to allow the deduction for the entire stolen amount of Rs. 10,75,500.

Conclusion:

The Tribunal allowed the assessee's appeal, directing the Assessing Officer to permit a deduction for the entire stolen amount of Rs. 10,75,500, considering the conditional and disputed nature of the recovered sums and articles. The judgment emphasizes the principle that contingent receipts should not affect the calculation of revenue deductions for losses incurred in the course of business.