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

JUDGEMENT

(1.) THE question referred to us is :

(2.) IN order to appreciate the contentions that have been advanced by Sri Ramamani, for the assessee, it is necessary to set out a few further details. Now, it appears that on the 28th April, 1951, Thiagarajan, the cashier, approached Ramachandra Chettiar, the vice-president of the bank and got him to sign a cheque for Rs. 15, 000 on an account of the assessee with another bank. Thiagarajan represented to the vice-president that a constituent of the bank, one Vasantha Chettiar, had sent word to say that he would be withdrawing an amount of Rs. 15, 000 and that was the reason why the cash balance of the bank had to be increased.

(3.) BUT that it should arise out of the carrying on of the business and be incidental to it is an essential requirement before the deduction can be justified. Their Lordships clearly laid down that this is a question turning on the facts of each case whether the embezzlement in respect of which deduction is claimed takes place in the carrying on of the business. Learned counsel for the assessee, however, seeks to draw some assistance from certain passages in the judgment of the Supreme Court. He would argue that notwithstanding the subsequent burglary, which was by the cashier himself, which led to the removal of the funds from the premises of the bank, the placing of this sum of Rs. 15, 000 in the bank premises was itself actuated by fraudulent motives amounting to, in a manner of speaking, an attempted embezzlement by the cashier. We are not satisfied that whatever might have been the intention of the cashier when he fraudulently obtained the cheque, that intention can be said to continue after the cashier had replaced the funds in the safe room of the bank. The mere circumstance that the cashier was himself the burglar cannot lead to the conclusion that the theft was part of the fraud or the attempted embezzlement by the cashier.