1996 (3) TMI 43 - HC - Income Tax

Court rules stock-in-trade not lost until criminal case resolved. Decision hinges on outcome of proceedings.

The High Court upheld the Tribunal's decision to reject the claim for loss of stock-in-trade by the assessee. It was determined that the stock could not ... Revenue Expenditure Issues:- Rejection of claim for loss of stock-in-trade by the TribunalAnalysis:The case involved a reference under section 256(2) of the Income-tax Act, 1961, regarding the rejection of the claim made by the assessee for loss of stock-in-trade. The assessee, a registered firm, filed a return of income showing a total income of Rs. 1,54,543 for the year 1975-76, which was later revised to Rs. 73,543, reducing Rs. 81,000 on account of the value of stock of sal seeds. The stock of sal seeds was seized by the police on suspicion of being stolen property, leading to legal proceedings. The High Court directed the sale of the stock, resulting in proceeds of Rs. 1,24,600 being deposited in court. The assessee claimed a deduction of Rs. 81,000 as a loss of stock-in-trade. However, the Income-tax Officer did not accept the claim and added a sum of Rs. 12,500 to the assessee's income.The Commissioner of Income-tax (Appeals) held that the loss of income cannot be treated as a loss until the criminal court decides the matter against the assessee, thereby declining the deductions. The Tribunal upheld this decision, stating that the stock cannot be considered lost until the criminal case is resolved. The High Court concurred with the Tribunal, emphasizing that the status of the stock-in-trade as a loss depends on the outcome of the criminal case. Until the court decides whether the stock is confiscated or returned to the assessee, it cannot be treated as a loss for deduction purposes. Therefore, the Tribunal's decision to reject the claim for loss of stock-in-trade was deemed correct, ruling in favor of the Revenue.