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TMI Blog1996 (1) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal return filed belatedly on July 28, 1980, could be considered and allowed ? (ii) Whether loss of ornaments held as security and not as stock-in-trade in money-lending business be allowed as deduction under section 28 ?" The assessee is a registered firm and it deals in money-lending business. A theft took place at the house of the assessee in the intervening night of November 2 and 3, 1978, and pawned silver ornaments of the value of Rs. 1,32,559 and cash of Rs. 2,000 were taken away. It is submitted that in order to redeem the ornaments, a sum of Rs. 27,120 was paid. The issue relates to the assessment year 1980-81, at the accounting period ending Diwali, 1979. The Income-tax Officer did not entertain the claim since the revised r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e records. Certain expenditure is allowed under section 37 of the Act. Section 37 deals with the general provisions of any expenditure not being expenditure of the nature described in sections 30 to 36. Therefore, it is a residuary clause and it says that the expenditure not being in the nature of capital expenditure or personal expenses of the assessee, laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head " Profits and gains of business or profession ". In the present case, the assessee had actually incurred a loss of Rs. 27,120 which he had to pay to his customers, who had pawned the articles in lieu of the loan advanced to them as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of much relevance but its nexus to the nature of the business is material. In that context, their Lordships further held that cash is the stock-in-trade of a banking business and its loss in the course of the business under varying circumstances is deductible as a trading loss in computing the total income of the business. Subsequently, in another decision of the Supreme Court in the case of CIT v. Nainital Bank Ltd. [1966] 62 ITR 638, relating to the same bank, a question arose regarding jewellery pledged with the bank by constituents and loss of jewellery by dacoits. The value of the jewellery was adjusted against the amounts due from constituents and difference received or paid by the bank. Therefore, the question was that whether it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the assessee in the business. Since the assessee deals in money-lending business on the basis of security in terms of the ornaments ; therefore, his trading activities involved some security for loan advanced by him. In case, such security is lost from him and he had to compensate the loanee or pawnor, in that case, he is entitled to that much loss of expenditure under section 37 of the Act, Since the assessee has failed to satisfy both the authorities below that he had incurred a loss of sum of Rs. 1,32,559 towards ornaments, therefore, it has to be disallowed. The Tribunal though referred to the aforesaid two decisions, but only concluded that this is a loss claimed by the assessee, which ought to have been allowed. But they have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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