Trading loss from wartime enemy bombing of stock-in-trade remained deductible in business profits computation.

Loss of stock-in-trade caused by enemy bombing during wartime was treated as a trading loss incidental to the assessee's money-lending business and therefore deductible in computing taxable profits under section 10 of the Income-tax Act. The Court accepted the factual finding that the damaged property was stock-in-trade and held that, on the circumstances, the loss arose in the course of business and was the converse of a trading receipt. The deduction was allowed, the reference was answered in favour of the assessee, and the High Court's view permitting the deduction was affirmed.

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Issues: Whether the loss of stock-in-trade caused by enemy bombing during wartime in the course of the assessee's money-lending business was an allowable business deduction under section 10 of the Income-tax Act.

Analysis: The assessee was carrying on business in a war-zone area and the stock-in-trade was damaged by bombing during the accounting period. The Tribunal's finding that the loss was a loss of stock-in-trade was not challenged. On the facts and circumstances, the loss arose in the course of the business and was incidental to the business carried on by the assessee. The Court treated the loss as the converse of a trading receipt and relied on prior authority recognising that loss of stock-in-trade through enemy action is a trading loss.

Conclusion: The loss was an allowable business loss and deductible under section 10; the answer to the reference was in favour of the assessee.

Final Conclusion: The appeal failed, and the High Court's view allowing the deduction was affirmed.

Ratio Decidendi: Loss of stock-in-trade occasioned by enemy action during the carrying on of business in wartime is a trading loss incidental to the business and is deductible in computing taxable profits.

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