Recovery of embezzled funds earlier written off remains a revenue receipt and is taxable as income.

Recovery in a later year of amounts earlier treated as embezzled income and written off as a business loss remains a revenue receipt. The assessee cannot recharacterise such recovery as capital accretion merely because it is received from the employee's heirs after the original loss was recognised. The recovered sum therefore retains its revenue character and is includible in total income for the relevant assessment year.

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Issues: Whether the amount recovered in a subsequent year from the heirs of an employee who had embezzled money and whose embezzlement had been written off as a loss in an earlier year was a revenue gain assessable to tax as part of the assessee's total income.

Analysis: The recovery represented money earlier treated by the assessee itself as embezzled income and written off against income as a business loss. The assessee could not, in a later year, characterise the same recovery as a capital accretion. The recovered sum retained the character of a revenue receipt linked to the earlier embezzlement and was includible in the total income for the relevant assessment year.

Conclusion: The recovered amount was held to be a revenue gain and was assessable to tax as part of the assessee's total income.

Ratio Decidendi: A recovery of money earlier treated by the assessee as embezzled income and written off as a loss is taxable as a revenue receipt when recovered in a later year.

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