TaxTMI 
TaxTMI 
1954 (12) TMI 32
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....45). The assessee had a munim by name Chandrattan Laxminarayan Daga, who held a general power of attorney executed in his favour by the assessee on May 13, 1944, for the general conduct and management of the assessees business at Bombay and other places. Between November 15, 1944, and November 23, 1944, this munim withdrew from the blank five sums of money amounting in all to Rs. 2,30,636-4-0 for meeting his personal liabilities arising as a result of heavy loses in speculative transactions of silver, bullion, etc., entered into by him in his individual capacity. Entries in the cash book were posted to the debit of "Suspense Account" (udrat Khata). The assessee was informed of these heavy withdrawals by the munim by a telegram sent to him at Bikaner by his cashier on November 25, 1944. The assessee soon after returned to Bombay, revoked the power of attorney granted to the munim and brought a suit in the Bombay High Court for the recovery of the amounts withdrawn by the munim, viz., Rs. 2,30,636-4-0. The munim admitted in writing his liability to the assessee. An ex parte decree was obtained against the munim on February 20, 1945. The munim paid Rs. 28,000 on account of his liabili....
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....n that they were taxing the company on what the company in a loose way had made and secured. In point of law they were engaged in assesseing the profits of the companys trade not of the company in a loose way had profits of the company itself but of the companys trade, and I have to consider whether there is the least ground for supposing that losses of these sums resulting in this bad debt were losses in the trade. I quite think, with Mr. Latter, that if you have a business..... in the course of which you have to employ subordinates, and owing to the negligence of the dishonesty of the subordinates some of the receipts of the business do not find their way into the till, or some of the bills are not collected at all, or something of that sort, that may be an expense connected with and arising out of the trade in the most complete sense of the word. But here that is not this case at all. This gentleman was the managing director of the company, and he was in charge of the whole thing, and all we know is that in the books of the company which do exist it is found that moneys went through the books into his pocket. I do not see that there is any evidence at all that there was a loss i....
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....misappropriated stood to the assessees credit in the bank it cannot be deemed to have reached the "till" untill it got to Bikaner. We cannot accept this contention. The assessee is carrying on business at a number of places and has bank account in several banks. Whenever money is credited in any of thses banks it must be deemed to have reached him. Where money has reached him and was lost thereafter it cannot be regard as a loss in business. It was lost in the same way as if it would have been stolen. Such a loss cannot be allowed to be deducted under section 10(2) (XV) of the Income-tax Act. 8. We would also point out that even assuming that the fact that Chandrattan was endowed with very wide powers is immarterial and that he should be regarded in the position of a subrdinate, we think that misappropriation of all monies by him from the bank from time to time for a purpose unconnected with the business of the concern cannot be regarded as a loss in trade. The loss of money through the negligence and dishonesty of the subordinate which can be regarded as a loss in trade must, according to Rowlatt, J., be due to the fact that money did not find its way into the till or some of t....
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....It was held that the sum of Rs. 21,372 could not be treated as a loss in the accounting period of the assessment year 1942-43 and was therefore deductible from the profits of that period. Satyanarayana Rao, J., who was one of the parties to the decision observed : "It seems to be a well-established practice in England that loss by embezzlement is a permissible deduction. Of course, as pointed out by snelling, the loss is allowed as a deduction only if the embezzlement can be said to be necessarily incurred in carring on the trade and springs directly from the necessity of deputing duties to the various employees. The question whether the amount so misappropriated was a trading loss and a permissible deduction from the profits for income-tax purposes was considered by Rowlatt, J., in Curtis v. Oldifield Ltd., where a manging director of a company who was in solec harge of the business of the company diverted the funds of the company for the personal use. The judgement of the learned judge in my opinion deals with the question when a defalcation or embezzlement could be treated loss and when such diversion of monies unauthorisedly by an employee goes out of the ambit of trad....