Hayley And Co. Ltd. V. Commissioner Of Inland Revenue

1961 Present: Basnayake, C. J., and Sinnetamby, J.

HAYLEY & CO., LTD., Appellant, and COMMISSIONER OF
INLAND REVENUE, Respondent

S. C. 8/60-Income Tax Case Stated BRA. 287

come tax-Loss suffered by burglary-Right of assesses to deduct it from profits or income-" Outgoings and expenses "-Income Tax Ordinance (Cap. 188), ss. 5, 6 (1) (a), 9 (1), 10 (c).

The assessee was a limited liability company which carried on a business in the export of rubber and other produce which it purchased in open market. Large sums of money were kept each day in the office safe for the purpose of making purchases on the following day. One night the Company's office was burgled and its safe was removed with all its contents.

Held, that the nett loss suffered by the burglary was an " outgoing " deducti­ble under section 9(1) of the Income Tax Ordinance for the purpose of ascertaining the profits or income of the Company from its trade or business.

CASE stated under section 74 of the Income Tax Ordinance (Cap. 188).

H. W. Jayewardene, Q. C., with S. Ambalavanar and N. R. M. Daluwatte, for the assessee-appellant.

B. C. F. Jayaratne, Crown Counsel, with M. Kanagasunderam and H. L. de Silva, Crown Counsel, for the assessor-respondent.

Cur. adv. vult.

July 10, 1961.    BASNAYAKE, C. J.-

I have had the advantage of reading the Judgment prepared by my brother Sinnetamby. I am in agreement with the opinion he has expressed and the order he has made as to costs but I wish to add a short note of my own.

The only question for decision is whether the net amount of the loss sustained by the assessee by the burglary of his office safe may be deducted under section 9(1) of the Income Tax Ordinance for the purpose of ascer­taining the profits or income of the assessee from the source described in section 6 (1) (a) as " profits from any trade, business ".

Briefly the material facts are as follows : The assessee is a limited liability Company carrying on business in Galle. One of the Company's busi­ness activities is the purchase of rubber for export. For the purpose of paying for the Company's purchases of rubber it withdrew from its Bank on every day on which it was open sufficient money to pay for its pur­chases on each business day. On 17th April 1952 the Company drew Rs. 96,075 for the purpose of paying for its purchases. On the night of 19th April the Company's Office was burgled and its safe was removed with its contents. A sum of Rs. 23,775 was recovered by the Police thereby reducing the amount of the loss to Rs. 72,300. Although the assessee had insured against loss by theft, the Insurance Company for some reason which is not disclosed, refused to meet the loss of Rs. 72,300 but made an ex-gratia payment of half of it. The assessee's loss was thereby reduced to Rs. 36,150 which sum it claimed it was entitled to deduct for the purpose of ascertaining its profits from its trade or

business. The Assessor disallowed the claim and the Company appealed. The Authorised Adjudicator also disallowed its claim. The Company thereupon appealed to the Board of Review, which also disallowed the claim. The Company expressed its dissatisfaction with that decision and asked that a case be stated to this Court.

Section 9 (1) deals with three classes of deductions. One is " out­goings ", the second is " expenses incurred by the assessee in the production of the profits or income ", and the third is the specific deductions allowed by paragraphs (a)-(i) thereof. The word " outgoings " means what goes out and is a word of wide import. It is the opposite of the equally wide expression " income ", which means what comes in. In the context the word " expenses " is limited by the words " incurred by such person in the production thereof " while the word " outgoings " is not so limited. The two words are designed to express two different concepts one of wider import

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