Subba Rao, J. - (1.) This appeal of certificate raises the question whether loss of cash by dacoity is an admissible deduction under Section 10(1) of the Indian Income tax Act, 1922, hereinafter called the Act, in computing the assessee's income in a banking business.
(2.) The facts relevant to the question raised may be briefly stated. The assessee is the Nainital Bank Limited. It is a public limited company which carrier on the business of banking. It has various branches and one of them is situated at Ramnagar. In the usual course of its business large amounts were kept in various safes in the premises of the Bank. On June 11, 1951, at about 7 p.m. there was a dacoity in the Bank and the dacoits carried away the cash amounting to Rs. 1,06,000 / - and some ornaments etc. pledged with the Bank. For the assessment year 1952-53 the Bank claimed the said amount as a deduction in computing its income from the banking business on the ground that it was a trading loss. The Incometax Officer disallowed the claim on the ground that it was not a loss incidental to the banking business. On appeal, the Appellate Assistant Commissioner, of Income-tax, and on further appeal, the Income-tax Appellate Tribunal, confirmed that finding. On a reference to the High Court of Judicature at Allahabad, a Division Bench of that Court held that the loss by dacoity was incidental to the banking business and was, therefore, a trading loss and that the assessee was entitled to a deduction of the same under S. 10(1) of the Act. Hence the appeal.
(3.) Mr. Rajagopala Sastri, learned counsel for the appellant, argued that the Bank lost the money by burglary not in its capacity as a bank but only just like any other citizen, that the risk of burglary was not incidental to the business of banking and that, therefore, the amount burgled could not be deducted as a trading loss. Mr. A. V. Viswanatha Sastri, on the other hand, contended that the money lost by burglary was the stock in trade of the banking business, that it was kept in the Bank in the usual course of its business and that the risk of its loss was incidental to the carrying on of the said business and, therefore, the amount lost was a trading loss liable to be deducted under S. 10 (1) of the Act.;