COMMISSIONER OF INCOME TAX Vs. LAKSHMAMMA

JUDGEMENT

(1.) AT the instance of Commissioner of Income-tax, Mysore, Bangalore, the Income-tax Appellate Tribunal, Hyderabad Bench, in I.T.A. No. 5488 of 1958-59 on its file, referred to this court the question "whether the sum of Rs. 1,87,630 is, by is nature, taxable sum under the Indian Income-tax Act, 1922?" under section 66(1) of the Indian Income-tax Act, 1922 (to be referred to hereinafter as the "Act").

(2.) IT would be appropriate to recast this question as follow :

(3.) A case that bears on the question of law under consideration came up before a Bench of the Bombay High Court in Union Bank of Bijapur and Sholapur Limited, In re. In that case the assessee bank claimed in the assessment year 1955-56, under 10(2)(ix) of the "Act" a certain amount as loss by reason of embezzlement on the part of an employee and the income-tax authorities treating it as a business loss allowed it to be set off against the profits; in the accounting year 1937-38, the assessee recovered from the heirs of the employee a sum of Rs. 8,790 from the amount embezzled and the income-tax authorities, after deducting the law charges and certain other deductions from Rs. 8,790 included a sum of Rs. 4,737 in the total income of the assessee for the assessment year 1938-39 on the ground that the assessee having treated the loss as a revenue loss and obtained relief on that basis, any recovery made in respect of that loss must be regarded as a revenue gain as and when it occurred. When that question was referred to the High Court, the High Court held that in the circumstances of that case, the sum of Rs. 4,737, out of the sum of Rs. 8,790 recovered from the heirs of the employee being part of the amount embezzled by the assessee's employee the same was a revenue gain and was assessable to tax as part of the total income of the assessee for the assessment year 1938-39. Though the judgment of the court is very brief one, the principle underlying the decision appears to be that the assessee having treated the loss as a revenue loss and obtained relief on that basis cannot later turn round and say that the receipt is not a revenue receipt when that amount or a portion thereof is recouped.