NAINITAL BANK LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred to us for an answer :

(2.) THE following facts which have been stated in the referring order may be mentioned. THE assessee, the Nainital Bank Ltd., is a public limited company which carries on the business of banking. THE previous year of the assessee company is the calendar year, the relevant previous year for the assessment in question being the calendar year 1951. THE assessee company had various branches. One of the branches of the assessee was situated at Ramnagar. THE money of the branch was kept in iron safes. On June 11,1951, at about 7 p.m. eleven persons dressed in olive green uniforms of military pattern and armed with rifles and other lethal weapons raided the Ramnagar branch of the assessee bank and extorted the keys of various safes from the manager. THE dacoits opened the safes and took away cash amounting to Rs. 1,06,000 and various ornaments etc., which had been pledged with the bank. THE assessee claimed as a deduction in computing its income from the banking business for the assessment year 1952-53 the sum of Rs. 1,06,000 which had been taken away from the Ramnagar branch. THE Income-tax Officer refused to allow this amount as a deduction on the ground that the loss was not incidental to the business of the bank. This order was confirmed on appeal by the Appellate Assistant Commissioner. THE assessee preferred an appeal to the Tribunal and contended that the above sum is admissible as a deduction for the following reasons :

(3.) LEARNED counsel for the appellant assessee relied on Venkatachalapathy Iyer v. Commissioner of Income-tax, AIR 1952 Mad 238 and contended that the profits and gains of any business should be ascertained by ordinary commercial principles of trading and in order to constitute a trade loss it must be either a loss of stock-in-trade or a loss incurred in the course of the business and as incidental to it. He contended that it was enough that the stock-in-trade with the bank had been lost and it was not necessary to show anything else. Alternatively he contended that whether it was a loss in the course of business and is incidental to it has to be determined on the facts and circumstances of each case as no general principles governing all cases can be laid down. He contended that in this particular case the bank was bound to keep money which was needed every morning by the bank to carry on its business effectively and the money had to be kept with the manager and in the bank premises and the key had to be left with the manager. He contended that the cash was held in this way by the manager in the safes of the bank in the course of the banks business and incidental to it and that the loss was in the course of carrying on the banks business and was incidental to it even though the loss occurred after the close of banking hours and even though the loss occurred not by the embezzlement of any employee nor by an act of God or enemy action but by the act of the breakers of law. He contended that the risk of a bank being broken into, dacoity being committed, was a risk which was incidental to the carrying on of the business and that in the present case the money had been kept for the carrying on of the business and, therefore, the loss by the dacoity in this case was in the course of business and therefore incidental to it.