BRIJLAL GUPTA J. - (1.) THIS is a reference under section 66(1) of the Income-tax Act. The question which has been referred to us for opinion is : Whether, on a true interpretation of section 10(1) , section 10(2)(xi) and section 10(2)(xv) of the India Income-tax Act, the claims for the losses of Rs. 48,891 and Rs. 1,21,760 were permissible in the assessment years 1953-54 and 1954-55 respectively ?
(2.) THE facts giving rise to the reference may be shortly stated : THE assessee is a banking company with its head office at Nainital and branches in different towns of Uttar Pradesh. One of the branches of the assessee was in Ramnagar. On June 11, 1951, there was a dacoity in the Ramnagar branch in which currency notes of the value of Rs. 1,06,000 and numerous ornaments and pieces of jewellery which had been pledged with the bank by some of its constituents had been taken away by the dacoits. The loss of Rs. 1,06,000 was claimed by the bank as a deduction in the year 1952-53. It was disallowed by the authorities below, but on a reference to this court, this court held that that loss was allowable under section 10(1) . The decision of this court is reported in Nainital Bank ltd. v. Commissioner of Income-tax. We are, however, not concerned with the amount in this income-tax reference. In regard to the loss of jewellery and ornaments pledged with the bank the assessees case was that it had lost all hope of recovery of these articles notwithstanding the fact that the dacoits had been apprehended. The case of the assessee was that there was pressure on the bank by the pawners who demanded settlement of their respective accounts and it the interest of business and for reasons of commercial expediency the bank settled with some of the constituents in 1953-54 and with others in 1954-55.
(3.) THE manner in which the settlements were arrived at way this : Where the market value of the pledged property at the time of the pledge was more than the amount which had been advanced on the security of these ornaments, the excess was paid to the pawner and where it was less, the balance was recovered from the constituents and the loan accounts were treated as adjusted. THE cases where the excess was paid to the constituents were very few. THE total adjustment of the debts thus made amounted to Rs. 48,891 in the assessment year 1953-54 and to Rs. 1,21,760 in the succeeding assessment year 1954-55. From the above it will be clear that as the cases where the excess amount was paid were very few and as, where there was a deficiency, the deficiency had been recovered, the two amounts mentioned above must represent the amounts of the loans remitted or treated as adjusted.;