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Issues Involved:
1. Whether the assessee was entitled to claim sums as revenue deductions in the assessment years 1950-51 and 1951-52. 2. The enforceability of debts arising from illegal transactions. 3. The timing of the debt becoming bad or irrecoverable for income-tax purposes. Issue-wise Detailed Analysis: 1. Entitlement to Revenue Deductions: The primary issue was whether the assessee could claim Rs. 10,960 in the assessment year 1950-51 and Rs. 15,060 in the assessment year 1951-52 as revenue deductions before arriving at the assessable profits. The assessee, involved in the business of Adatia and speculation, faced losses due to the insolvency of a constituent, Shantilal Jivraj, and wrote off the unrecovered amount as a bad debt in Samvat Year (S.Y.) 2005. The Appellate Assistant Commissioner initially disallowed the claim for S.Y. 2003, suggesting it should be claimed in S.Y. 2005. The Tribunal later allowed the claims, stating that the amounts were revenue deductions and should be deducted before arriving at the assessable profits. 2. Enforceability of Debts from Illegal Transactions: The Income-tax Officer disallowed the claims on the grounds that the debts arose from illegal forward transactions in turmeric, which were unenforceable under the law. The Tribunal, however, held that the legality of the transactions did not affect the admissibility of the claims under sections 10(2)(xi) or 10(2)(xv) of the Indian Income-tax Act. The Tribunal viewed the transactions from a commercial angle, determining that the amounts were revenue deductions. The High Court agreed, stating that the unenforceability of the debts did not prevent them from being considered bad or irrecoverable for tax purposes. 3. Timing of Debt Becoming Bad or Irrecoverable: The distinction between the assessment years 1950-51 and 1951-52 was contested. The Revenue argued that for 1950-51, the debt could be considered irrecoverable as the assessee had attempted recovery and failed. However, for 1951-52, there was no evidence of such attempts. The High Court dismissed this distinction, noting that the cases had been treated similarly throughout the proceedings. The Court emphasized that the debts became bad due to the constituents' inability to pay, not because of the Supreme Court's decision. The High Court concluded that the debts were bad in the years of account and thus deductible. Conclusion: The High Court ruled in favor of the assessee, affirming that the amounts claimed in the respective assessment years were allowable as deductions. The Court emphasized that the enforceability of the debts did not affect their deductibility for tax purposes. The Tribunal's view that the assessee was entitled to the deductions was upheld, and the question referred was answered in the affirmative. The Commissioner was directed to pay the costs of the assessee.
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