Deductions for stolen sums come within the general principles of law and rule in finding out what represents the gains and profits of a business, and are claimed as losses incidental to the trade.

NARASIMHAM, J.

( 1 ) THE question that has been referred by the Income-tax Appellate Tribunal, calcutta branch, Patna, to us for opinion is as follows: "whether, in the circumstances of the case, the sum of RS. 8675/- is allowable either as a trading loss or an expenditure laid out or expended wholly and exclusively for the purposes of the business within the meaning of Section 10 (2) (xii) of the Act" (Presumably section 10 (2) (xii) is an error for Section 10 (2) (xv ).

( 2 ) THE facts found by the Tribunal are these:

( 3 ) THE assessee carries on the business of selling yarn, seculating on cotton and page 1 of 4 Banshidhar Onkarmal vs. Commissioner of Income-tax (06. 12. 1948 - ORIHC) accounting year commencing from 21-10-1941 and ending on 8-12-1942 on the ground that the said sum was stolen from the iron-safe inside his shop by one Jhaharmal who was a relation of the assessee and who was also working as the accountant of his firm during the year in question. The shop of the assessee used to be closed at about 8 P. M. and the iron safe containing the cash used to remain inside the shop. It was found by all the Income-tax authorities that the said Jhaharmal secured the keys of the shop after 8 P. M. , entered the shop at about 10 P. M. opened the iron-safe and removed Rs. 8995/ -.

( 4 ) ON these facts the question arises as to whether the assessee can claim a deduction of the sum stolen, either under the general provisions of Sub-section (1) of Section 10 or under Clause (xv) of Sub-section (2) of that section. There is no express provision in the Indian Income-tax Act authorising such deduction but Mr. Monanti has relied on some decisions in which sucn losses have been allowed on general principles of computation of profits.

( 5 ) MR. Mohanti's mam contention is that the theft was commuted by the accountant was an employee of the assesses and that there was no material distinction between embezzlement by an employee of an assessee or by theft by such an employee so far as deduction for the purpose of estimating the profits is concerned. He relied, on 'jagarnath v. Commr. of Income-tax', 4 Pat 385. Where it was held that a sum embezzled by an employee in the course of the business was a loss incidental to the conduct of the business and should be deducted in calculating the assassable income. The correctness of this decision has been doubted in a later Patna decision reported, in 'mulchand Hiralal v. Commr. of Income-tax', AIR (25) 1938 Pat 159, where the facts found were that some of the money of the assessee was stolen from an employee of the assessee while it was being sent to the Bank. But the loss did not occur in the year of accounting and consequently it was unnecessary to consider whether the loss was deductable from the total profits. Therefore the observations of the learned Judges regarding the correctness of 4 Pat 385 were admittedly in the nature of obiter dicta. In the present case, however, it is unnecessary to consider which of the two views is correct because even on the basis of the earlier Patna decision 4 Pat 385 Mr. Mohanti's contention cannot be supported. It cannot be said that the theft which occurred after the close of the shop was committed by the accountant in the course of his employment or else that the theft was incidental to the conduct of the business. In fact, there is hardly any distinction between the case of a theft of this type committed by an employee or servant or the owner on the one hand and by an ordinary burglar on the other. The fact that he was an employee merely facilitated the commission of the theft by giving him access to the keys. The position might have been quite different if the theft had occurred during office hours, prior to the crediting of the sum to the account of the employer. This case is somewhat similar to a lahore case reported in 'assessment of Income-tax v. L. N. Gadodia and Co. ', AIR (22) 1935 Lah 53.

( 6 ) THE aforesaid view is supported by the followi