SALEM GUGAI SRI KRISHNA BANK LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us is :

(2.) THE assessee carries on the business of banking. At some time after the closing hours of the bank on the 28th April, 1951, and its opening on the following Monday, the 30th of April, 1951, the premises of the bank had been broken into. THE safe room had been entered. THE safe had been opened and a large amount of cash amounting to the entire closing balance on 28th April, 1955, which was Rs. 26,959 and odd had been taken away. In addition, jewels to the value of about rupees two lakhs, which had been pledged with the bank which had also been kept in the safe, had been removed. In connection with this incident, one Thiagarajan, who was in the employ of the bank as cashier, was prosecuted. Almost the entirety of the jewels and cash of about Rs. 5,000 were recovered from him. THE unrecovered balance of Rs. 21,736-14-0 was debited to Thiagarajans account. At a meeting of the directors of the bank held in December, 1952, it was decided that civil proceedings should be taken against Thyagarajan for recovery of Rs. 5,000 only and that the balance of Rs. 16,737 should be written off. It was in respect of this amount so written off that the assessee claimed to be entitled to deduct that amount from the profits of the relevant accounting year. THE Income-tax Officer disallowed the deduction on the ground that as the loss was the result of a theft committed after office hours, it was not a defalcation by an employee; further it was not a trade debt which could be said to have been incurred in the normal course of business. This view was concurred in both by the Appellate Assistant Commissioner and the Tribunal and, on the application of the assessee, the question set out above stands referred to us for determination.

(3.) THE principle laid down in the above decision has not, as far as we are aware, been departed from in any other case.