JUDGMENT

UNTWALIA J. :—This is an assessees appeal by special leave from the decision of the Andhra Pradesh High Court in a reference made by the Income Tax Appellate Tribunal, Hyderabad Bench under S. 256 (1) of the Income Tax Act, 1961 - hereinafter referred to as the 1961 Act. The question referred for the opinion of the High Court at the instance of the Revenue was in the following terms :

"Whether, on the facts and in the circumstances of the case, the assessee was entitled to the allowance of the loss of Rs. 30,000/- ?"

2. The facts of the case as found by the Tribunal are in a very narrow compass. Their correctness was neither challenged nor could it be challenged in the High Court on any legal grounds, such as, that the findings were vitiated as being perverse, wholly unreasonable or unsupported by any evidence. No reference to challenge the correctness of the facts was either asked for or made. The High Court has, therefore, rightly proceeded to answer the question on the facts found by the Tribunal.

3. The assessee is a Registered firm carrying on business in gold, silver, and gunnies at Rajahmundry. It also derives income from investment in Government securities. The assessment year in question is 1964-65. The corresponding accounting year ended on October 16, 1963. The assessee had sold some Government securities and bonds in the years both preceding and succeeding the accounting year concerned in the present appeal. Income-tax was levied on such income also. For the assessment year 1964-65 it returned a loss of Rs. 5,008/- from the business. The said figure was arrived at after claiming a loss of Rs. 30,000/- on account of theft committed by some stranger during the corresponding accounting period. A sum of Rs. 50,000/- for the purpose of purchasing Government securities was brought in cash to Rajahmundry by its employee. The money was handed over to its cashier. When the cashier turned his back to take out some books, a stranger suddenly arrived at the place of assessees business and committed the theft of Rs. 30,000/-. In spite of the lodging of a report with the police, no amount could be recovered. The assessee claimed the sum of Rs. 30,000/- lost by theft as a permissible deduction in computation of his net income on the ground that it was a trading loss. The Income Tax Officer rejected the claim treating the loss as being either of idle money or a capital loss. According to him it was not incidental to the business of the assessee. Its appeal before the Income Tax. Appellate Commissioner failed but the assessee succeeded in the further appeal taken to the Tribunal. The loss was allowed on the ground that it was incidental to the carrying on of the business of the assessee. The Commissioner of Income Tax asked for a reference which was made on the question of law above mentioned.

4. Many cases of this kind involving almost identical questions on facts somewhat similar or varying have come up for consideration before the Courts in England and other countries and the various High Courts in India. The line of distinction as to whether a particular loss is a trading loss or a capital loss has sometimes been very subtle and thin resulting in expression of different opinions by the different High Courts almost on identical or similar facts. The leading decision of this Court is in the case of Badridas Daga v. Commr. of the Income-Tax (1958) 34 ITR 10. The principle decided in that case was reiterated with greater force,if we may say so with respect, in another decision of this Court in Commr. of Income-Tax, U.P. v. Nainital Bank Ltd. (1965) 55 ITR 707. After the said two decisions most of the High Courts have applied, as they were bound to, the principles enunciated in them in favour of the assessee under similar circumstances and facts. But we shall presently show that the Andhra Pradesh High Court persisted and has done so even in the judgment under appeal in taking, rather, a narrow view of the matter and not corre