Business theft loss deduction allowed where cash held for money-lending operations was treated as stock-in-trade.

Cash kept for use in a money-lending business was treated as part of the business stock-in-trade, and profits were required to be computed on ordinary commercial principles. A theft loss is deductible when it is a commercial loss incidental to the trade rather than a capital loss. On the stated facts, the cash taken from the strong-room was regarded as a loss arising out of and incidental to the conduct of the business, so the amount was allowable in computing taxable profits. The commentary also records a concurring view that the theft loss was incidental to the money-lending business and therefore deductible.

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Issues: Whether loss by theft of cash used in the money-lending business and kept in the business premises was allowable as a deduction in computing taxable profits.

Analysis: The majority treated the cash kept for business operations as part of the stock-in-trade of the money-lending business. It held that profits must be computed on ordinary commercial principles, and that a loss is deductible if it is a commercial loss incidental to the trade and not merely a capital loss. On the facts, the theft from the strong-room was regarded as a loss arising out of and incidental to the conduct of the business, so the amount lost was allowable in computing profits.

Conclusion: The issue was decided in favour of the assessee, and the theft loss was held deductible.

Dissenting Opinion: Anantakrishna Ayyar, J. held that the cash was part of the business stock-in-trade and that the theft loss was incidental to the money-lending business, and therefore deductible. He would have answered the reference in the affirmative.

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