9911796707
|
Home
Issues Involved:
1. Disallowance of bad debts claimed by the assessee. 2. Determination of the accounting year in which the debts became bad. Issue-Wise Detailed Analysis: 1. Disallowance of Bad Debts Claimed by the Assessee: The primary question for consideration was whether the disallowance of the sums of Rs. 5,211 and Rs. 1,080 claimed as bad debts by the assessee was right in law. The assessee, engaged in the business of money-lending, had advanced sums to two debtors, Subramanian Chettiar and Alagappa Chettiar, which he claimed as bad debts in the assessment year 1956-57. The Income-tax Officer disallowed these claims, reasoning that the debts had become bad prior to the accounting year. The Appellate Assistant Commissioner and the Tribunal upheld this disallowance, stating that there was no evidence to support the contention that the debts became bad in the accounting year. 2. Determination of the Accounting Year in Which the Debts Became Bad: The court analyzed the requirements under Section 10(2)(xi) of the Income-tax Act, 1922, which allows for the deduction of bad and doubtful debts. It was emphasized that the determination of whether a debt is bad is a question of fact, and the burden of proof lies on the assessee to demonstrate that the debt became bad in the accounting year. The court noted that a bad debt is one where there is no possibility of repayment, and this determination must be based on objective facts rather than the creditor's subjective judgment. It was also highlighted that each accounting year is a separate period, and losses sustained before its commencement are irrelevant. The court referred to precedents, including the Privy Council's decision in Commissioner of Income-tax v. Chitnavis and the Supreme Court's approval of this view in Bank of Bihar Ltd. v. Commissioner of Income-tax, to underscore that the determination of when a debt becomes bad is a factual matter to be decided based on relevant circumstances. The court found that the Tribunal's conclusion that the debts became bad prior to the accounting year was not supported by material evidence. The Tribunal's reasoning that the assessee failed to show why he waited until the assessment year 1956-57 to write off the debts was deemed erroneous. The court emphasized that the assessee should satisfy the departmental authorities with proper material or evidence that the debts became bad in the accounting year. Conclusion: The court concluded that the Tribunal's finding was not based on any material or evidence and was vitiated by an erroneous approach. Consequently, the question was answered in favor of the assessee, and the disallowance of the bad debts was deemed incorrect. The court awarded costs to the assessee, with counsel's fee set at Rs. 250. Judgment: Question answered in favor of the assessee.
|
