06 February 2009
my clint a commission agent was drawn cash of Rs.3 lacs from bank and it was stolen while bringing to shop.he lodged compalint with police.whether same can be climed as business expenses u/s 28
06 February 2009
Check Link http://articles.manupatra.com/PopOpenArticle.aspx?ID=96abd7cd-a576-4c30-af9b-111c6fcacf4b&txtsearch= and study Article "Taxation - LOSS BY EMBEZZLEMENT OR THROUGH DEFALCATION"
Check Link http://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2008ITAct/casesec28.htm and take note of "Theft cannot be differentiated from embezzlement - It is settled that for determining whether any loss from theft, dacoity, embezzlement, etc., is deductible or not, what is material is whether the loss incurred by theft, dacoity, etc., is incidental to the carrying on of the business. It does not make such difference whether such act is committed by the employees of the assessee or by strangers. It is difficult to draw a distinction between embezzlement of the amount from the bank and theft of the amount from the cash box of the businessman from his sales counter or business premises. What is material is whether the loss was caused to the assessee in the course of his business activity - G.G. Dandekar Machine Works Ltd. v. CIT [1993] 202 ITR 161 (Bom.)"
Based on the above, it appears to me that theft of Rs 3 lacs while bringing it from Bank to Shop can be claimed as expenditure provided, of course, you should be able satisfy the Department, if and when required, that you have taken all possible precautions and steps for lodging police complaint and getting 'Not traceable' letter etc
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