1983 PLP 379 (PTD)

‑‑‑‑ Trading loss‑Assessee having large daily turnover and required to keep large cash in shop‑Cash carried home by partner for safe custody at night‑Loss of cash in transit‑Held, a business loss. 111 I T R 263 ref. R. J. Joshi with H. K. Sajnani and L. K. Chatterjee for Applicant. SMT. SUJATA V. MANOHAR. J.‑The assesses‑firm is doing wholesale business in "Kirana" (grains & provisions). It is a partnership firm having five partners. The dispute relates to assessment year 1970‑

71. In that year one of the partners of the firm, Lalchand Khanduram was carrying cash balance of the firm amounting to Rs. 20,000 from the shop to his home for safe custody at night on his scooter. The bag containing the amount accidentally fell off the scooter and was lost. A police complaint was lodged but the money‑bag was not found. The assessee has claimed the amount as a business loss. The I. T. O. negatived the assessee's claim on the ground that the cash was not stock‑in‑trade of the assessee. This order was confirmed by the Appellate Assistant Commissioner. The Tribunal, however, held that the assesses‑firm was required to keep large cash for the purposes of its business and hence the loss in question is incidental to the business of the assessee and should be allowed. It passed an order accordingly. From this order at the instance of the Commissioner the following question has been referred to us :‑ "Whether on the facts and in the circumstances of the case, the Tribunal was justified in allowing the loss of Rs. 20,000 as loss incidental to the business for the assessment year 1970‑71 ?" 2 This question is governed by the ratio of the decision of the Supreme Court in the case of Ramchand Shivnarayan v. Commissioner of Income‑tax A. P. ((1978) 111 I T R 263 : (1978 Tax L R 228)). In that case the Supreme Court held that if there is a direct and proximate nexus between the business operation and the loss, or where the loss is incidental to the business operation of the assessee, the loss is deductible, as, without business operations and the doing of all acts incidental to them, no profit can ire earned. From a commercial viewpoint, therefore, such a loss is a trading loss which is deductible from the total income of the assessee. In that case a sum of Rs. 30,000 which had been borrowed for the purpose of purchasing Government securities was stolen from the cashier. The Supreme Court held that the loss of Rs. 30,C00 was directly connected with the business operations of the assess" and was incidental to the carrying on of the business of purchase of Government securities to earn profit. In such a situation the loss was a part of the trading loss and was deductible as such in arriving at the true profits of the assessee.

3. In the present case the Tribunal has held that the assessee‑firm had a large daily turn‑over and it was required to keep a large cash amount in the shop during the course of its business. Since such an amount was being carried home by one of the partners for safe custody during the night when it was lost, the loss was incidental to the business operations of the assessee In view of the facts in this case, therefore, the loss must be considered as incidental to the carrying on of business by the applicant. The Tribunal has, in our view, correctly allowed this loss as a business loss.

4. In the premises the question which has been referred to us is answered in the affirmative, that is to say, in favour of the assessee and against the Commissioner.

5. The applicant to pay to the respondent costs of this reference. Reference answered in affirmative.