1990 (6) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Deduction of bad debts written off for the assessment year 1970-71.
2. Deduction of rebate allowed to customers for laboratory charges and copy printing charges for the assessment year 1969-70.

Summary:

Issue 1: Deduction of Bad Debts Written Off (Assessment Year 1970-71)
The primary issue was whether the sum of Rs. 17,693 representing bad debts written off should be allowed as a proper deduction while computing the business income of the assessee-family for the assessment year 1970-71. The Income-tax Officer disallowed the deduction on the grounds that the debts related to a discontinued business. However, the Tribunal found that the assessee was conducting a composite business with interlacing, interlocking, and unity of control. The Tribunal concluded that the disallowance was not sustainable and deleted the addition made by the Department. The High Court upheld the Tribunal's decision, noting that the entire business was indivisible and inseparable, and the discontinuance of a part of the business did not amount to discontinuance of the entire business.

Issue 2: Deduction of Rebate Allowed to Customers (Assessment Year 1969-70)
The second issue was whether the sum of Rs. 21,682 representing rebate allowed to customers for laboratory charges and copy printing charges should be allowed as a proper deduction while computing the business income of the assessee-family for the assessment year 1969-70. The Income-tax Officer disallowed this amount, stating that the assessee was not doing business in the colour laboratory during the assessment year under consideration. The Tribunal, however, found that the assessee was conducting a composite business and that the rebate was a part of maintaining good customer relationships. The High Court agreed with the Tribunal, stating that the assessee's business was an integrated and composite one, and the rebate was allowable as a deduction.

Conclusion:
The High Court concluded that the Tribunal was justified in deleting the additions made by the Department for both assessment years under consideration. The Court emphasized that the assessee's business was composite and integrated, with interlacing, interlocking, and unity of control. Therefore, the deductions for bad debts and rebates were permissible. Both questions referred to the Court were answered in the affirmative and against the Department. The assessee was entitled to its costs, with counsel's fee fixed at Rs. 500 (one set).