1989 (3) TMI 35 - HC - Income Tax

Summary

Issues:
1. Allowability of deduction for payment to Nishi Technos as commission.
2. Allowability of bad debts amounting to Rs. 1,25,271.

Analysis:

Issue 1: Allowability of deduction for payment to Nishi Technos as commission

The Commissioner of Income-tax disallowed the deduction of Rs. 84,143 claimed by the assessee as commission paid to Nishi Technos, stating that the genuineness of the payments and transactions needed to be proven. Investigations revealed that Nishi Technos could not be traced to the given address, raising doubts about the existence of the party. The Income-tax Appellate Tribunal disagreed with the Commissioner's findings, citing a demand draft issued to Nishi Technos as evidence of the payment's legitimacy. The Tribunal held that the amount should be allowed, despite Nishi Technos not being an income-tax assessee. The court observed a question of law arising from the circumstances, leading to a direction for the Tribunal to refer the issue for the court's opinion.

Issue 2: Allowability of bad debts amounting to Rs. 1,25,271

The assessee claimed Rs. 1,25,271 as bad debts written off, but the Income-tax Officer disallowed most of the amount, considering them as provisions for bad debts rather than irrecoverable debts. The Commissioner of Income-tax (Appeals) upheld this decision. However, the Tribunal noted the assessee's past practice of claiming and subsequently recovering bad debts, accepted by the Revenue in previous years. Referring to the Commissioner's previous decision allowing the claim for the assessment year 1974-75, the Tribunal decided to allow the deduction for the current year as well. Detailed particulars and evidence were presented to the Tribunal, supporting the non-recovery of the debts. The Tribunal found the debts had genuinely become bad in the relevant year, justifying the deduction. The court acknowledged the question of law regarding the new evidence presented to the Tribunal and directed a statement of case to be drawn up for both issues.

In conclusion, the court reframed the question related to bad debts and directed the Tribunal to refer both issues for the court's opinion, without awarding costs in this case.