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TMI Blog1955 (3) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... orders of the Income-tax Officer or the Appellate Assistant Commissioner or in the order of the Tribunal. As, in our opinion, it is necessary to follow the procedure adopted by the assessee, we have incorporated the same in this statement of the case. The assessee has no suggestion to make. In pursuance to the said rules, the assessee company was required to set up purchasing centres and location of weigh bridges for the facility of the sugarcane cultivators. The assessee company was further required to purchase sugarcane at these weighment centres and payment for the cane was to be made within a fortnight of the date of weighment. The assessee company was required to exhibit on the notice board at each weighment centre the dates and hours at which payments would be made from time to time. In pursuance to these rules, the assessee company announced that payments would be made at Dooria, which was one of the purchasing centres, on every Tuesday and Sunday. On 16th April, 1950, the assessee company sent through one of its employees a sum of ₹ 35,000 in a jeep car for payment to the cane growers. This amount was looted on the way. There is no dispute that the assessee company l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overned by the Bihar Sugar Factories Control Act, 1937, (Bihar Act VII of 1937) and the Bihar Sugar Factories Control Rules, 1938. In accordance with these rules the assessee company was required to set up purchasing centres for sugarcane and to locate weigh bridges at the purchasing centres. The assessee company was also required to purchase sugarcane at these centres and payment for the case to the sugarcane cultivators was required to be made within a fortnight of the date of weighment. The assessee company was required to exhibit on the notice board at each weighment centre the dates and hours at which payments would be made from time to time. In compliance with the statutory rules the assessee company announced that payments to the sugarcane cultivators would be made at Dooria which was one of the purchasing centres on Tuesdays and Sundays of each week. On the 16th of April, 1950, the assessee company deputed one of its employees to go to Dooria and sent a sum of ₹ 35,000 in cash through its employee in a jeep car. The amount of ₹ 35,000 was robbed on the way, and in spite of police investigation the amount was not recovered and the miscreants could not be traced. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of the total income for the purpose of income-tax. In our opinion, the argument addressed on behalf of the assessee is well founded and must be accepted as correct. It is clear in this case that the purchase of sugarcane was controlled by statutory rules framed under the Bihar Sugar Factories Control Act. By virtue of these rules the assessee company was bound to set up purchasing centres and to locate weigh bridges for the purchase of sugarcane. The assessee company was also bound to purchase sugarcane at these weighment centres and to make payment to the sugarcane cultivators within a fortnight of the date of weighment. The assessee company was also required to exhibit on the notice board at each weighment centre the dates and hours on which payment would be made from time to time. The relevant rules are rules 35, 36, 41 and 43 of the Bihar Sugar Factories Control Rules framed under the Bihar Act VII of 1937. Rule 43 provides that a person who fails to comply with or contravenes any of the rules will be liable to be prosecuted in a criminal Court. It is manifest, therefore, that the assessee company had to despatch money to various purchasing centres for payment to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on those profits by previous agreement or otherwise, is perfectly immaterial. The tax is payable upon the profits realized, and the meaning to my mind is rendered plain by the words 'payable out of profits'". The principle was of course laid down with reference to English law on the point. But in Pondicherry Railway Co. v. Commissioner of Income-tax, Madras***, it was held by the Judicial Committee that the principle laid down by Lord Chancellor in Styles' case was of general application and that the principle was unaffected by the specialties of the English tax system. Lord Herschell also observed in Russell v. Town and County Bank :- "The profit of a trade or business is the surplus by which the receipts from trade or business exceeded the expenditure necessary for the purpose of earning those receipts..................Unless and until you have ascertained that there is such a balance, nothing exists to which the name of profits can properly be applied." Lord Parker made a similar statement in Usher's Wiltshire Brewery v. Bruce ##:- "Where a deduction is proper and necessary to be made in order to ascertain the balance of profits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney Terrell, C.J., in Mulchand Hiralal v. Commissioner of Income- tax, Bihar and Orissa. But, in our opinion, the authority of Jagarnath Therani v. Commissioner of Income-tax, Bihar and Orissa(2), has not been shaken in any way by the decision of the Division Bench in Mulchand Hiralal v. Commissioner of Income-tax, Bihar and Orissa. In Jagarnath Therani v. Commissioner of Income-tax, Bihar and Orissa, the assessee claimed to deduct from his business profits a certain sum of money which was embezzled by the gomashta of the assessee in the ordinary course of business. It was held by the Bench that the loss was allowable as it was a loss incidental to the conduct of the business. The principle of this decision applies to the present case. On behalf of the Income-tax department Mr. R.J. Bahadur strongly relied upon a decision of the Madras High Court in Ramaswami Chettiar v. Commissioner of Income-tax, Madras. But that case is not really in point for the finding of the majority of the learned Judges was that the loss by theft was not incidental to business. Reference was also made by learned counsel for the Income-tax department to In re L.N. Gadodia & Co. The authority of this case is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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