Income Tax Appellate Tribunal - Chandigarh
Smt. Swaran Kanta Jain vs Assistant Commissioner Of Income-Tax on 23 March, 1995
Equivalent citations: [1995]54ITD126(CHD)
ORDER
J. Kathuria, Accountant Member
1. This appeal by the assessee pertains to assessment year 1988-89 and the only issue is regarding the non-allowance of loss of Rs. 3,71,209 due to robbery of stock-in-trade and cash.
2. The assessee is an individual running a jewellery shop in her proprietary capacity. The assessee claimed a business loss of Rs. 3,71,209 on account of robbery. The said amount consisted of cash of Rs. 69,107 and diamonds valued at Rs. 3,02,101. The assessee's version was that she was carrying cash and the diamonds to her residence for purposes of stock taking on 31-3-1988 when while in transit and before she reached the house, a robbery took place and she was dispossessed of cash and diamonds. A first information report (FIR) was filed with the police but the amount could not be recovered. The assessee filed insurance claim with two companies, i.e., National Insurance Company and United India Insurance Company. It appears that the United India Insurance Company Ltd. settled the claim of the assessee in November 1990 by paying a sum of Rs. 1,44,586. We were informed that the other insurance company had still to settle the assessee's insurance claim.
3. The Assessing Officer was of the opinion that since the loss had taken place when the assessee was carrying cash and diamonds to her residence, the loss was not incidental to the assessee's business, because it did not occur in the carrying out of the operation nor was it incidental to the business operation of the business.
4. The learned CIT(A) also held that the carrying of cash and diamonds to home could not be termed as business operation. She accordingly confirmed the disallowance.
5. Shri S.P. Sharma, the learned Counsel for the assessee, submitted that the factum of robbery and resultant loss was beyond doubt. It was submitted that the FIR lodged with the police and the claim lodged with the insurance companies were proof positive of the loss having occurred to the assessee. It was submitted that the assessee took the diamonds and cash to her residence for stock taking and for safe custody. It was submitted that the assessee used to take stock-in-trade to her residence and sometimes cash not only for safe custody but for transacting business at home, i.e., for showing the items of jewellery etc., to her clients. It was emphasised that it was in this context that the insurance covers were taken from two companies to cover the risk of the cash and stock-in-trade being taken out of the business premises. It was submitted that diamonds were taken home not for any display or for pride but out of business necessity. It was submitted that since the stock taking was not complete during the shopping hours, the diamonds and the cash had to be taken home. It was also submitted that stock taking was necessary because that day happened to be the closing day of the accounting year. It was, therefore, submitted that the loss was incurred during the course of business and there was a direct or proximate nexus between the carrying on of the business and the loss that had occurred to the assessee.
6. Referring to the Patna High Court judgment in the case of Mulchand Hiralal v. CIT[ 1938] 6 ITR 151 on which reliance had been placed by the learned CIT(A). It was submitted that the said case was distinguishable on facts because there was no provision for allowing the loss. It was submitted that the Patna High Court had examined the provisions of the Income-tax Act as these then stood and came to the conclusion that the loss could not be allowed because it was not an expenditure solely for purposes of earning such profits or gains. The learned Counsel for the assessee submitted that the law on the point had since been developed by various High Courts and the Supreme Court and though it was held that such loss was not allowable under Section 10(2)(xv) of the Indian Income-tax Act, 1922, it was allowable under Section 10( 1) of the said Act. In other words, it was submitted that the loss though not admissible under Section 37 of the Income-tax Act, 1961, was admissible under Section 28 of the Income-tax Act on commercial principles. It was, therefore, submitted that the Patna High Court decision did not correctly lay down the law which developed later.
7. Relying on the Supreme Court decision in the case of Badridas Daga v. CIT[1958] 34 ITR 10, it was submitted that such loss was allowable under Section 10(1) of the Indian Income-tax Act, 1922 under ordinary commercial principles. It was submitted that such a loss was allowable if it sprang directly from the carrying on of the business and was incidental to it. Relying on another Supreme Court decision in the case of CIT v. Nainital Bank Ltd. [ 1965] 55 ITR 707, it was submitted that loss incurred by dacoity was incidental to the carrying on of the business of banking and was deductible as a trading loss. It was submitted that the same ratio would
8. The learned Counsel for the assessee also placed reliance on the Madras High Court decision in the case of CIT v. K. T.M.S. Mahmood [1969] 74 ITR 100. That was a case where an assessee who was a dealer in semiprecious stones, had purchased 750 watches. While he was carrying them to his house late at night, he was waylaid and the watches were stolen. Subsequently, 489 watches were recovered and their sale proceeds were brought to tax as business income. The assessee's claim of loss of Rs. 13,271 was negatived by the Assessing Officer. The High Court finally held that the watches constituted stock-in-trade of the assessee and their transit from the assessee's business premises to his residence was a business operation and hence the loss of the watches in the course of the transit by theft was incidental to the carrying on of the business in watches and allowable as a business loss under Section 10(1) of the Indian Income-tax Act, 1922. It was submitted that in the instant case also the cash and the diamonds which in any case constituted stock-in-trade of the assessee were taken home not for any personal consideration unconnected with the business but for safe custody and for stock taking.
9. Reliance was also placed on the Supreme Court decision in the case of Ramchandar Shivnarayan v. CIT[1978] 111 ITR 263 for the proposition that if there is a direct and proximate nexus between the business operation and the loss or it is incidental to it, then the loss is deductible.
10. The learned Counsel for the assessee submitted that if the well-known principles formulated by the Supreme Court and various High Courts were applied to the instant case, then there was no doubt that the assessee was entitled to the loss of Rs. 3,71,209.
11. The learned D.R., on the other hand, contended that the loss is allowable only if there is a proximate or direct nexus between the business operation and the loss or the loss is incidental to the business. It was submitted that the loss occurred near the residence of the assessee. It was also submitted that there were no instruments to weigh the diamonds and hence the purpose of stock taking as advanced by the learned Counsel for the assessee was not correct. It was, therefore, submitted that there was no urgency that stock taking must be completed on 31 -3-1988 because the same could have been done later and not necessarily on 31 -3-1988 itself. It was submitted that in the case of Nainital Bank Ltd (supra), the Supreme Court had mentioned that every loss was not deductible and that the deductible loss must relate to business operation. It was, therefore, submitted that the loss had been correctly disallowed by the revenue authorities.
12. We have carefully considered the rival submissions as also the facts on record. The Assessing Officer has not gone into the quantum of loss, he has in principle, held that the loss is admissible to the assessee. We have, therefore, first to decide whether the loss in the instant case could be said to be a business loss or not.
13. As held by the Supreme Court and the various High Courts, every case has to be decided in the setting of its own facts. The facts in the instant case clearly show that the diamonds constituted the assessee's stock-in-trade. Such stock-in-trade was being taken home. The assessee claims that on 31-3-1988 it was being taken home for purposes of stock taking. It has also been stated before us that the assessee has been taking stock-in-trade home for purposes of displaying the same to clients. It has also been submitted that cash and stock-in-trade were sometimes taken home for safe custody. Now the question that arises is whether the loss of stock-in-trade and of cash in such a situation would be an admissible loss if occasioned by robbery or theft. In the case of K.T.M.S. Mahmopd (supra), the facts were that the assessee was taking certain watches to his residence, when he was waylaid by the policemen and robbed of the same. The Madras High Court held that it was the loss of stock-in-trade and the watches were being taken home not for personal considerations unconnected with the business of the assessee. According to the High Court if the policemen waylaid and deprived the assessee of the watches, that was a risk which the transit of the watches for safe keeping necessarily or incidentally involved, and hence the loss of the watches in the course of transit by theft was held to be incidental to the carrying on of the business in watches. In our opinion, this decision supports the case of the assessee so far as the loss of diamonds is concerned. Whether it was for purposes of stock taking or for showing it to the clients or for safe custody, the stock-in-trade did not cease to be so when it was taken out of the business premises. It was to cover such risk that the assessee had taken insurance policies in respect of cash and stock-in-trade. We, therefore, have no difficulty in coming to the conclusion that the loss of stock-in-trade of diamonds amounting to Rs. 3,02,101 was a business loss in the hands of the assessee and allowable to her.
14. As regards the loss of cash as a result of robbery, the facts stand on different footing. The assessee was neither a money lender nor running a bank. Cash was not her stock-in-trade and hence its loss in transit is not allowable to the assessee. We hold and direct accordingly. Since the matter has been disposed of by the Revenue authorities on the ground that the loss claimed by the assessee was not admissible loss, we have decided the issue in that light and held above that one of the loss of Rs. 3,02,101 was a business loss. The question of exact quantification of loss has not been gone into by the Assessing Officer. During the course of hearing before us, the learned counsel for the assessee submitted that a sum of Rs. 1,44,586 was received from United India Insurance Company in full and final settlement of the assessee's claim in November 1990. It was also submitted that no such income was shown by the assessee in assessment year 1991-92 or in any other year. We were also given to understand that the claim from National Insurance Co. had still not been settled. All these matters are connected with the quantification of loss. Since the revenue authorities have not gone into this aspect of the matter, we restore the issue of quantification of loss in the light of our observations made above to the Assessing Officer for determination.
15. In the result, the appeal is partly allowed.