Embezzlement – not a loss in business

A business that suffers embezzlement of funds by its staff cannot claim the loss as a ‘loss in business income’ to calculate income tax, because it is an unascertained liability, the Income Tax Appellate Tribunal Bengaluru, has held.

Avijit Dewanjee, who runs the Honda dealership, Max Motors, wanted the Rs. 2.24 crore misappropriated by his staff to be treated as a loss in the course of business. Dewanjee has complained to the police. The auditors have observed that the management only suspects fraud by the employees and a complaint has been lodged with the police. The Assessing officer disallowed the loss. “It is not ascertained liability in the assessment year under consideration. Accordingly, we reject the claim of the assesse,” the ITAT said.

Popular from web