| 6/1/2009 |
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| Board of Special Commissioners - Cases |
| Case no. 14/54 |
Decided: 28 July, 1954 |
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Deduction of an expense incurred by a bank cashier in respect of the payment of a cash shortage - article 10(1), 10(1)(h) and 11(c), now 14(1), 14(1)(g) and 26(c), Income Tax Act
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Appellant, a bank cashier, suffered a cash shortage which he had repaid forthwith. Commissioner disallowed the deduction for the following reasons:
- appellant had preferred to make good for the shortage out of his own pocket rather than claim a re-imbursement from the bank (the Board accepted appellant's explanation viz. that he preferred to avoid a further worsening of his relationship with the bank manager and thus endanger his job);
- appellant had not suffered a loss which, if it had been a profit, would have been assessable (the Board held that this did not preclude appellant from claiming the deduction once the expense satisfied the general deduction formula of article 10(1));
- a cash shortage is not an expense incurred wholly and exclusively in the production of the income (the Board cited and compared several foreign cases and applied the principle that the loss incurred was deductible provided it was incidental to the trade);
- the cash shortage was of a capital nature (the Board held that the expense was not made "with a view to bringing into existence an asset or an advantage for the enduring benefit of the trade"; rather it was of a recurring nature). The Board upheld the appeal.
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