1992 (1) TMI 68 - HC - Income Tax

Summary

Issues Involved:
1. Deduction of Rs. 40,81,140 as a bad debt.
2. Deduction of Rs. 40,81,140 as a business loss.
3. Deduction of Rs. 11,36,779 as a revenue loss in respect of the sale of current assets.

Summary:

Issue 1: Deduction of Rs. 40,81,140 as a Bad Debt
The assessee, a non-resident company, claimed Rs. 40,81,140 as a bad debt written off. The Income-tax Officer (ITO) disallowed the claim, stating that the debt had not become bad by the end of the accounting period and legal proceedings for recovery were pending. The Commissioner of Income-tax (Appeals) and the Tribunal upheld this view, finding no material evidence that the debt had become bad. The High Court affirmed this decision, noting that the assessee failed to prove the debt was irrecoverable during the relevant year.

Issue 2: Deduction of Rs. 40,81,140 as a Business Loss
The assessee alternatively claimed the amount as a business loss. The Tribunal rejected this claim, categorizing the loss as a capital loss rather than a business loss. The High Court upheld this finding, stating that the loss was not incurred in the course of business but was related to the sale of the business. Consequently, the High Court answered in the affirmative, against the assessee and in favor of the Revenue.

Issue 3: Deduction of Rs. 11,36,779 as a Revenue Loss in Respect of the Sale of Current Assets
The assessee claimed Rs. 11,36,779 as a revenue loss due to the sale of current assets. The ITO disallowed the claim, but the Commissioner of Income-tax (Appeals) allowed it, stating that the loss on consumable stores and unsold produce is a revenue loss. The Tribunal upheld this view, and the High Court affirmed, noting that the loss was an ascertained figure accepted by the Department. The High Court answered in the affirmative, against the Revenue and in favor of the assessee.

Conclusion:
The High Court upheld the Tribunal's findings on all issues. The claims for bad debt and business loss were disallowed, while the claim for revenue loss on the sale of current assets was allowed. The High Court emphasized that findings of fact by the Tribunal cannot be disturbed unless there is no evidence to support them or the Tribunal has misdirected itself in law.