COMMISSIONER OF INCOME TAX Vs. CHAKKA NARAYANA

JUDGEMENT

(1.) THE question referred for the opinion of this Court under S. 66(1) of the Indian IT Act is :

(2.) THE reference relates to the asst. year 1955 56 and the accounting year ending with 31st March, 1955. The assessee was a dealer in cloth. He was also having dealings in respect of government securities. It is his case that he went to Madras in January, 1955, to sell government promissory notes through Dalal & Co., stock brokers, sold government securities through that company and obtained a cheque for Rs. 20,790. He encashed it and went to the Madras Central station that evening to entrain for Proddatur, and at the station he was pickpocketed. He immediately gave a complaint to the police but the money said to have been lost was not found on the person charge sheeted in that behalf. The assessee claimed this loss of Rs. 20,700 as an allowable deduction from out of the business profits.

(3.) IT should spring directly from the carrying on of the business and be incidental to it. The loss should be inseparable from the business. Applying this test to the present case, we must hold that the loss was not incidental to or one arising out of the business. It could not be posited that it was absolutely necessary for the assessee to cash the cheque issued and to carry the money on his person. It is only when it could be posited that it was part of his business to take money with him that it could be said that the loss was incidental to his business. 4. This opinion of ours gains support from the judgment of the Full Bench of the Madras High Court in Ramaswami Chettiar vs. CIT (1930) ILR 53 (Mad) 904. The majority of the Full Bench expressed the opinion that the loss incurred by theft of money used in a money lending business and in the business premises should not be claimed as a permissible deduction, where the theft was committed by persons who were not at the time of the offence employed as clerks or servants in the business of the assessee.