TaxTMI 
TaxTMI 
1979 (11) TMI 66
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....ing the assessee's claim of Rs. 71,648 as a loss incidental to the trade in the assessment year 1969-70 ? " The facts giving rise to this question, briefly stated, are : The assessee which is a public limited company carries on the business in the manufacture and sale of rosin and turpentine. It follows the financial year as its year of account. In the previous year relevant to the assessment year 1966-67, the assessee had despatched goods worth Rs. 73,081 to M/s. Mandya Paper Mills, Madras, and credited the sales by debiting the purchaser's account accordingly. The purchaser did not retire the documents relating to those goods and the assessee then instructed its agent at Madras to take delivery of the goods and sell them on its account....
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....n its appeal before the AAC, the assessee disputed the disallowance of its claim. It was, however, conceded by the counsel appearing on behalf of the assessee that this item was not in the nature of bad debt and hence it was not allowable under s. 36(2) of the Act. It was, however, submitted that since this amount had suffered tax in the assessment year 1966-67, in equity it should not be subjected to tax again in the year under consideration. On a verification from the books the AAC found that the amount debited to the sales account was Rs. 71,648 and not Rs. 73,08l. However, in his opinion, the claim was neither in the nature of a bad debt nor a business loss of this year and on that view he upheld the addition but to the extent of Rs. 71....
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..... 28 of the Act, apart from the loss being incidental to the trade and that the loss should fall to the assessee in the capacity of a trader, what is still more relevant to see is as to whether the loss had occurred in the relevant previous year. It is settled that the deductions can be permitted in respect of only those expenses and losses which are incurred in the relevant accounting year. For the purpose of computing yearly profits and gains, each year is a separate self-contained period of time in regard to which profits earned or losses sustained before its commencement are irrelevant. In cases of embezzlement of funds, like a speculative adventure, however, the view has been taken that it does not necessarily result in loss immediatel....
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....e appellate authorities, one of the grounds being that the loss occurred in the assessment year 1960-61. On reference, this court held that the claim was an admissible deduction for the assessment year 1961-62, because a dispossession would become a loss only after the recovery becomes impossible or the chances of recovery become very remote. In our opinion, the principle which is applied in cases of embezzlement of funds by an agent or an employee would not be applicable in the case of a trade loss because in the case of a trade loss there is no question of any reasonable chance of obtaining restitution or persuading or compelling anyone by process of law or otherwise to make good the loss. Apart from this, in the ultimate analysis, these ....