COMMISSIONER OF INCOME TAX versus S. N. A. S. A. ANNAMALAI CHETTIAR

Citation: [1973] 2 S.C.R. 460 · Decided: 27-09-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Dismissed

Judgment (excerpt)

J 
460 
COMMISSIONER OF INCOME TAX 
v. 
S. N. A. S. A. ANNAMALAI CHETIIAR 
September 2 7, 1972 
A 
[K. S. HEGDE, P. JAGANMOHAN REDDY, I. D. DUA AND 
H. R. KHANNA, JJ.J 
B 
Jnco111e Tax Act, 1922-S. 10 f.l)-Bt1si11rss loss-H11siness carried on 
in H't1r. ::.one-Da1na,cre 10 proper()· during war-If could he giren deduc~ 
lion to as husines.f /o,\·s. 
The assessee, who was carrying on business in Malaya which was within 
the war zone, suffered damages to property during the war on account of 
bombing. The loss in question was loss of stock-in-trade. On the question 
C 
whether the loss could be given deduction to as a business loss in computing 
the net income of assessee under's. 10 ( 1) of the Income-tax Act, 1922. 
HELD : On the facts and circumstance of the case the loss occurred 
must be taken to be a loss incidental to the business carried on by the 
assessee uuring the war. If the assessee had earned any profits out of his 
business during the \\'ar the department undoubtedly have to consider those 
profits as assessable income. When Joss had occurred in such situation the 
D 
depn.:-tment cannot contend that the loss in question must not be a business 
loss. 
A loss of stock-in-trade occasioned by enemy action must be con-
sidered as a trade loss. [461 FJ 
Bombay High Court in Pohoo111al Bros. v. Con1missioner of Income-tax, 
Bombay City. 34 I.T.R. 64, Commissioner of Income-tax, U.P. v. Nainital 
Bank Ltd., 55 I.T.R. 707, Green v. !. G/ikstan, 14 Tax Cases 364 and 
London Investment and Mortgage Co. Ltd. v. Inland Revenue Commis-
E 
sioners [1957] 1 All England Reports. 377, referred to. 
CIVIL APPELLATE JURISDICTION" Civil Appeal No. 2016 of 
1969. 
Appeal by Special Leave from the judgment and order dated 
April 27, 1967 of the Madras High Court in Tax Case No. 75 
of 1963. 
F 
S. C. Manchanda, B. D Sharma and R. N. Sachthey, for the 
appellant. 
M. C. Chagla, Janendra Lal and B. R. Agarwala, for the res-
pondent. 
The Judgment of the Court was delivered by 
HEGDE, J. This appeal by special leave arises from a 
deci-
sion of the Madras High Court in a reference under section 66 (I) 
of the Indian Income Tax, 1922 (to be hereinafter referred to as 
the Act). 
As d"manded by the assessee the Tribunal submjtted 
the statement of the case to the High Court seeking its opinjon on 
the question "whether on the facts and in tl:je circumstances of 
the case. the loss of Rs. 1,93,750/- was an allowable deduction 
under section 10 of the Income-tax Act ?" 
G 
H 
t 
A 
B 
c 
D 
E 
F 
G 
C.I.T. v. ANNAMALAI CHETTIAR (Hegde, 1.) 
~61 
Material facts are these : 
The assessee respondent was a member of a Hindu undivided 
family which carried on money lending business in 
India 
and· 
abroad. 
In the course of such money lending business, proper-
ties were taken over in settlement of debts as and when occasion 
arose. 
The family was disrupted on March 
28, 
I 939. 
The 
assessee received some shares in some companies, properties and 
gardens and certain other items in Malaya. 
Even after the parti-
tion the assessee continued the money lending business in Malaya. 
During the war, in general with others, 
the assesscc 
suffered 
damages to these properties on account of Japanese bombing. 
This.loss occurred on account of bombing in December, 19..\ 1. a 
date falling within the accOU!J.ting period ending on 
April 
12. 
1942, relevant for the assessment year 1942-43. 
This loss wa~ 
claimed as a business loss. 
The Income Tax Officer rejected that 
claim. 
The Appellate Assistant Commissioner affinned the order 
of the Incop1e Tax Officer. 
The assessee did not succeed before 
the Tribunal as well. 
The Tribunal rejected the claim of 
the 
assessee on the sole ground that bombing. which caused the loss. 
was not incidental to the business of the assessee. 
The Tribunal 
held that the loss in question was a loss of stock-in-trade. 
That 
finding of the Tribunal has not been challenged. 
Hence we have 
to proceed on the basis that the loss caused to the assessee was a 
loss of stock-in-trade. 
It was contended on behalf of the departJ\lent that the loss in 
question cannot be given deduction to, as a business loss, 
in 
computing the net income of the assessee under section 10 (1). 
According :o the department that was not a loss incidental to the 
business carried on by the assessee. 
We are unable to appreciate the contention of the department. 
It is established that the asses~ee was carrying on business 
in 
Malaya when th

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