Theft loss deduction denied where stolen cash was not stock-in-trade and the loss was outside ordinary business operations.

A theft loss is deductible only where the money stolen is proved to be stock-in-trade and the loss is incidental to the ordinary course of business. The cash taken from the assessee's shop was not shown to be stock-in-trade of the money-lending business and was treated as capital, and the theft occurred after business hours rather than in the conduct of trading operations. A claim that the amount was expenditure wholly and exclusively for business purposes also failed. The loss was therefore not allowable as either a trading loss or business expenditure.

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Issues: Whether the sum stolen from the assessee's shop was allowable as a trading loss or as expenditure laid out wholly and exclusively for the purposes of the business.

Analysis: A deduction for a loss of this kind can be claimed only if the money stolen is shown to be stock-in-trade of the business and if the loss is incidental to the conduct of that business. On the facts found, the cash in the safe was not proved to be stock-in-trade of the money-lending business and was treated as capital. The theft took place after the shop had closed and was not an incident of the ordinary business operations. A theft facilitated by the thief's employment does not, by that fact alone, become a business loss deductible in computing profits. The alternative claim under the provision dealing with expenditure wholly and exclusively for business purposes also failed.

Conclusion: The sum of Rs. 8,675 was not allowable either as a trading loss or as business expenditure, and the answer was against the assessee.

Ratio Decidendi: A theft loss is deductible only when it is proved to be a loss of stock-in-trade and to have arisen incidentally in the ordinary course of the business; a theft occurring outside the business operation and attributable merely to the thief's position as an employee is not such a deductible loss.

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