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Issues:
1. Determination of whether the two amounts claimed as bad debts were actually incurred during the course of the money-lending business of the assessee. 2. Analysis of the true nature of the transactions and whether the claimed debts could still be considered as bad debts for assessing the income of the assessee. 3. Examination of whether there was sufficient evidence to establish that the debts had become irrecoverable prior to the relevant year of account. Analysis: The judgment by the Allahabad High Court, delivered by Justice S. C. Manchanda, pertained to a case stated under section 66(2) of the Income-tax Act by the Income-tax Appellate Tribunal, Allahabad Bench. The questions referred involved the validity of claimed bad debts amounting to Rs. 3,25,000 and Rs. 16,005 in the assessment year 1942-43. The first debt was due from a debtor named Shantilal, while the second was from Mansukhlal Panthulal, both related to the money-lending business of the assessee, a Hindu undivided family. The Tribunal had questioned the nature of these debts and their recoverability status. The judgment addressed the preliminary objection raised regarding the jurisdiction of the Allahabad High Court to decide the reference due to the inclusion of Ajmer in Rajasthan. This objection was overruled based on previous rulings. The detailed facts surrounding the debts were presented, including the history of transactions and attempts at recovery. The Tribunal had rejected the claims of the assessee, leading to the reference to the High Court for determination. Regarding the first debt of Rs. 3,25,000, the Tribunal found that the advances were not made in the course of money-lending business but were part of trading transactions or friendly loans. It was established that the debt had become bad earlier in 1938-39, and no efforts were made to recover the amount. Similarly, the second debt of Rs. 16,005 was deemed bad by the Tribunal due to lack of recovery attempts since the decree in 1932. The High Court upheld the Tribunal's findings, emphasizing the necessity for the debt to be good at the beginning of the relevant year and turning bad during that year. The counsel for the assessee argued against the Tribunal's findings, claiming lack of material to support the conclusion that the debts were not part of the money-lending business. However, the Court found that the evidence presented did not establish any hope of recovery during the relevant assessment year. Consequently, all three questions were answered against the assessee, affirming the Tribunal's decision. The assessee was directed to pay costs, and the judgment concluded with the assessment of legal fees.
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