9911796707
|
Home
Issues Involved:
The judgment addresses the following Issues: 1. Whether the trucks financed on hire purchase basis by the assessee constitute the assessee's stock-in-trade, leading to a loss on revaluation. 2. Whether the claim of the assessee for deduction of losses should be considered under section 36(1)(vii) and section 36(2) or as a trading loss under section 28. 3. Whether the debts in question had become bad during the relevant accounting year for deduction purposes. Issue 1: Trucks as Stock-in-Trade and Loss on Revaluation The controversy revolves around the repossessed vehicles by the assessee due to default in payments by hire purchasers. The Tribunal concluded that the vehicles belonged to the assessee as they were registered in the names of the hirers, and thus formed part of the stock-in-trade until handed over. The legal position established that the vehicles did not constitute the assessee's stock-in-trade, precluding any loss on revaluation. Citing precedent, it was held that the assessee could not benefit from the depreciated value of the vehicles if registered in the names of hire-purchasers. Issue 2: Deduction of Losses The Tribunal differentiated the loss incurred by the assessee as not a trading loss under section 28 but as a bad debt under section 36(1)(vii) read with section 36(2). It was determined that the assessee's business, despite being hire purchase financing, was akin to a money-lending business. Consequently, the loss due to non-recovery of financed instalments was deemed incidental to its money-lending activities, qualifying for deduction as a bad debt. The Tribunal set aside the Assistant Commissioner's order and allowed the deduction under the specified sections. Issue 3: Bad Debts and Deductions The Tribunal's decision was based on the assessee's business nature, categorizing the loss as a bad debt eligible for deduction under section 36(1)(vii) and section 36(2). As the vehicles were not considered stock-in-trade, the question of revaluation loss did not arise. Consequently, the assessee was deemed ineligible for deduction for the assessment years in question. Conclusion: The reference under section 256(1) of the Income-tax Act, 1961 was answered in the affirmative and against the assessee, denying the deduction claimed for the assessment years 1968-69 and 1969-70. The judgment clarified the legal position regarding the ownership of vehicles financed on hire purchase basis and the categorization of losses incurred by the assessee, emphasizing the distinction between trading losses and bad debts in the context of hire purchase financing activities.
|
