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Issues:
1. Whether the debt claimed as irrecoverable by the assessee can be adjusted against income for the assessment year 1949-50. 2. Whether the finding of the Tribunal that the debt had become irrecoverable long before the relevant accounting year is based on any material. Analysis: 1. The case involved a reference under section 66(2) of the Indian Income-tax Act, 1922, concerning the claim of a Hindu undivided family, engaged in money-lending business, to adjust a debt against income for the assessment year 1949-50. The debt in question was owed by an insolvent firm, and the dispute revolved around the timing of its irrecoverability. The Income-tax Officer, Appellate Assistant Commissioner, and Income-tax Appellate Tribunal had differing views on the matter. The Tribunal ultimately dismissed the assessee's appeal, concluding that the debt had become irrecoverable long before the relevant accounting year, thus disallowing the adjustment claim. 2. The primary issue before the High Court was whether there was sufficient material to support the Tribunal's finding that the debt had indeed become irrecoverable long before the relevant accounting year. The Court examined the legal standard for determining irrecoverability, emphasizing the need for the absence of any hope of recovery before classifying a debt as irrecoverable. The Tribunal's conclusion was based on the belief that the assessee had lost all hope of recovering the debt, except for a nominal sum, soon after 1941. However, the Court found this reasoning lacking in evidentiary support, as the official receiver's communication in March 1949 indicated uncertainty regarding further recoveries from the insolvent estate. In conclusion, the High Court held that the Tribunal's finding of the debt's irrecoverability before the relevant accounting year lacked substantiated material. The Court emphasized the requirement for concrete evidence indicating the absence of any hope for recovery before deeming a debt irrecoverable. The Court ruled in favor of the assessee, rejecting the Tribunal's conclusion and allowing the claim for adjusting the debt against income.
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