Trading loss deduction denied where cash snatched en route to bank was not directly incidental to business operations.

A cash loss caused by snatching from an employee en route to bank deposit was held not deductible as a trading loss under section 10(1) of the Income-tax Act, 1922 because the assessee failed to show a direct and necessary connection between the loss and the conduct of its business. A mere business connection was insufficient; the loss had to spring directly from business operations and be incidental to them. On the facts, taking cash to the bank and the attendant risk of theft by an outsider was not proved to be an inseparable part of the business activity. The reference was answered in the negative, in favour of the Revenue.

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Issues: Whether the loss of cash snatched from an employee while being taken for bank deposit was a trading loss arising in the ordinary course of, and incidental to, the assessee's business and deductible under section 10(1) of the Income-tax Act, 1922.

Analysis: Deduction under section 10(1) was available only where the loss sprang directly from the carrying on of the business and was incidental to it. A mere connection with business was insufficient. On the facts, the assessee failed to prove that the cash loss had such direct and necessary connection with the business operations. The evidence did not establish that taking cash to the bank, and the consequent risk of theft by an outsider, formed part of the business activity or was inseparable from it.

Conclusion: The loss was not a trading loss incidental to the assessee's business and was not allowable under section 10(1); the answer to the reference was in the negative, in favour of the Revenue.

Ratio Decidendi: For deduction as a trading loss, the loss must be shown by the assessee to arise directly from the conduct of the business and to be incidental to it; a loss connected only remotely with business activity is not deductible.

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