Trading loss deduction for bank cash lost in dacoity: ready cash at branch premises was incidental to banking business.

Cash held by a banking company in the ordinary course of business forms part of its circulating capital and stock-in-trade, so a loss is deductible where it arises in carrying on the business and is incidental to banking operations. Ready cash retained at branch premises is an integral feature of banking, and the ordinary risks attached to that retention include theft, dacoity, embezzlement and destruction. On that basis, loss of cash caused by dacoity had a direct nexus with the banking business and was treated as a deductible trading loss under section 10(1) of the Indian Income-tax Act, 1922.

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Issues: Whether loss of cash caused by dacoity from a bank branch premises is an admissible deduction as a trading loss under section 10(1) of the Indian Income-tax Act, 1922.

Analysis: Cash held by a banking company in the ordinary course of banking forms part of its circulating capital and stock-in-trade. Under section 10(1), a loss is deductible when it arises in carrying on the business and is incidental to the business operations. The retention of ready cash in bank premises is an integral part of banking, and the ordinary risks attached to that retention include theft, dacoity, embezzlement, and destruction. The loss therefore bears a direct nexus with the banking operation and is not a mere private loss unconnected with the business.

Conclusion: The loss by dacoity was incidental to the carrying on of the banking business and was deductible as a trading loss.

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