JAGDISH SAHAI,J. - (1.) AT the instance of the assessee, M/s. U. P. Vanaspati Agency, Kanpur (hereinafter referred to as the assessee), the statement of the case and the question of law, given below, has been referred to this court by the Income Tax Appellate Tribunal, Allahabad Bench (hereinafter referred to as the Tribunal), under section 66(1) of the Indian Income Tax Act, 1922 (hereinafter referred to as the Act) : Whether, on the facts and the circumstances of the case, the sum of Rs. 12,000 was an admissible deduction in working out the assessable income for the assessment year 1961 -62 ? The statement of the case relates to the assessment year 1961 -62, the accounting year being January 1, 1960, to March 31, 1961. The assessee is a registered firm carrying on business as a commission agent for vanaspati, ghee, soap, refined oil, etc. In the assessment year in question he was agent of M/s. Berar Oil Industries, Akola, in Madhya Pradesh, and Tung Bhadra Industries, Kurnool, in Andhra Pradesh.
(2.) ON January 4, 1960, the manager of the assessee handed over up one Prem Narain, an employee of M/s. Bharat Textiles, a sister concern of the assessee, a sum of Rs. 13,000 in order to deposit it in the Nayaganj branch of the State Bank of India, so that a hundi of M/s. Berar Oil Industries, Akola, of Rs. 21,000 be honoured. Sri Prem Narain handed over a cloth bag containing the amount of Rs. 13,000 at the State Bank of Nayaganj Branch. He then reported to the bank jamadar that the sum of Rs. 13,000 was stolen. The assessee made a first information report at a police station and a sum of Rs. 1,100 was recovered thought the police. Prem Narain was prosecuted but acquitted by the Court of Session on December 13, 1960, on the ground of want of evidence. The assessee claimed a deduction of Rs. 12,000 in the assessment year 1960 -61. The Income Tax Officer disallowed it on the ground that the amount was lost not by an employee of the assessee but of a sister concern. The assessees appeal before the Appellate Assistant Commissioner failed and so did his second appeal before the Tribunal.
(3.) THE Tribunal has, however, made the instant reference to this court. The Tribunal decided against the assessee on two grounds. Firstly, that the loss occurred in the assessment year 1960 -61 and not in the year 1961 -62, and, consequently assuming that there was loss, no deduction could be made in the assessment year 1961 -62. The second ground on which the Tribunal decided against the assessee is that there was no direct connection between the loss of Rs. 12,000 and the business of the assessee with the result that it could not be comprehended in the words "loss incidental to business.;