BADRIDAS DAGA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS case has been referred to us under s. 66(1) of the Indian IT Act by the Tribunal, Bombay Branch, by its application dated 19th Nov., 1953. The point which is stated by it is as follows: "Whether the said sum of Rs. 2,02,442 -13 -9 being part of the amount embezzled by the assessee's munim is allowable as a deduction under the Indian IT Act either under s. 10(1) or under the general principles of determining the profit and loss of the assessee or s. 10(2)(xv) -

(2.) THE facts, as would appear in the application, are as follows : The assessee is carrying on business, among other places, at Bombay. One of the businesses at Bombay was that of banker. The sources of income at Bombay are interest, adat, business in gold and silver, house property and dividend. The assessment year is 1946 -47, the relevant accounting year being Sambat year 2001 (18th Oct., 1944, to 4th Nov., 1945). The assessee had a munim by name Chandrattan Laxminarayan Daga, who held a general power of attorney executed in his favour by the assessee on 13th May, 1944, for the general conduct and management of the assessee's business at Bombay and other places. Between 15th Nov., 1944, and 23rd Nov., 1944, this munim withdrew from the bank five sums of money amounting in all to Rs. 2,30,636 -4 -0 for meeting his personal liabilities arising as a result of heavy losses in speculative transactions of silver, bullion, etc., entered into by him in his individual capacity. Entries in the cash book were posted to the debit of "Suspense Account" (udrat khata). The assessee was informed of these heavy withdrawals by the munim by a telegram sent to him at Bikaner by his cashier on 25th Nov., 1944. The assessee soon after returned to Bombay, revoked the power of attorney granted to the munim and brought a suit in the Bombay High Court for the recovery of the amounts withdrawn by the munim, viz., Rs. 2,30,636 -4 -0. The munim admitted in writing his liability to the assessee. An ex parte decree was obtained against the munim on 20th Feb., 1945. The munim paid Rs. 28,000 on account of his liability created by the decree. In the account of the munim, there was a debit of Rs. 106 -11 -9. The sum of Rs. 2,30,636 -4 -0 was transferred to the munim's account from udrat khata on account of the unauthorised withdrawals by him. A credit was given to the account of the munim for Rs. 300 -2 -0 for his salary and bonus. After the credit of Rs. 28,000 was given, balance of the account, viz., Rs. 2,02,442 -13 -9, was written off and claimed as an allowance under s. 10(2)(xv) of the Indian IT Act.

(3.) THE Tribunal accepted the assessee's contention that the amount of Rs. 2,30,636 -4 -0 which was withdrawn by its munim Chandrattan Laxminarayan Daga was misappropriated by him. It was, however, of the opinion that no deduction could be allowed in respect of it either under s. 10(1) or under s. 10(2)(xv) of the Act. In support of its view it referred to the decisions in Curtis vs. Oldfield (1925) 9 Tax Case 319, and Venkatachalapathy Iyer vs. CIT (1951) 20 ITR (363). Those are the decisions which have been relied upon not only by the assessee but also by the Department.