Business loss for stolen stock-in-trade is deductible when theft occurs during transit connected with trading operations.

Loss of stock-in-trade is deductible as a business loss where it arises from a risk incidental to the trade and is suffered by the assessee in the character of a trader. Watches were treated as stock-in-trade because the purchase quantity showed trading intent, and the recovery-sale proceeds were regarded as business income. The theft during transit to the assessee's residence for safe keeping was part of the business operation, so the loss remained connected with the business and was allowable as a business loss under section 10 of the Income-tax Act, 1922.

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Issues: Whether the loss of watches stolen while being taken from the business premises to the assessee's residence was an allowable business loss under section 10 of the Income-tax Act, 1922.

Analysis: The watches were held to be stock-in-trade, as the quantity purchased indicated trading intent and the subsequent sale of recovered watches was treated as business income. For allowance as a business loss, the governing test was whether the loss was connected with the business, incidental to the trade, and suffered by the assessee in his character as a trader. Applying that test, the transit of the watches for safe keeping was itself part of the business operation, and the theft during that transit was a risk incidental to the carrying on of the business in watches.

Conclusion: The loss was an allowable business loss and the answer was against the Revenue.

Ratio Decidendi: A loss of stock-in-trade is deductible as a business loss if it is incidental to the business operation and arises from a risk connected with the trade, even if the immediate cause is theft during transit for business purposes.

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