1989 (3) TMI 32 - HC - Income Tax

Summary

Issues:
- Allowance of provision for doubtful debts as a deduction in computing total income.
- Interpretation of relevant provisions of the Income-tax Act, 1961.

Analysis:
The High Court of Calcutta addressed the issue of whether the Appellate Tribunal was correct in allowing a provision for doubtful debts as a deduction in computing the total income of the assessee. The case involved an assessment year of 1974-75, with the assessee being Jardine Henderson Ltd. The Income-tax Officer disallowed the provision for doubtful debts claimed by the assessee, amounting to Rs. 20,00,461, stating that there was no provision in the Act for allowance of a future liability. However, the Appellate Assistant Commissioner allowed the deduction, which was further challenged by the Revenue in an appeal before the Tribunal.

The Tribunal considered the claim of the assessee and held that the provision for doubtful debts should be allowed as a deduction. It noted that the assessee had written off the doubtful debts in the profit and loss account and concluded that the amount could not be recovered from the companies concerned. The Tribunal also referred to Board's Instruction No. 370, which clarified that section 36(1)(vii) covered doubtful debts, and criticized the Income-tax Officer for ignoring these provisions. The Tribunal's decision was based on factual findings regarding the unrecoverable nature of the debts.

The High Court upheld the Tribunal's decision, emphasizing that the questions of whether a debt has become bad or doubtful and whether the assessee is entitled to write it off are questions of fact. The Court found no perversity in the Tribunal's findings and agreed that the claim of bad debt was justified. Therefore, the Court answered the question in the affirmative and in favor of the assessee.

Additionally, the Court noted the absence of a paper book in the case despite its pendency since 1979. The Court decided to proceed with the case based on the statement of case and other papers sent by the Tribunal, ultimately disposing of the matter without ordering costs.

Both judges, Bhagabati Prasad Banerjee and Suhas Chandra Sen, concurred with the judgment, affirming the Tribunal's decision to allow the provision for doubtful debts as a deduction in computing the total income of the assessee.