1936 (1) TMI 23 - HC - Income Tax

Summary

Issues:
1. Disallowance of claimed bad debt amount
2. Applicability of Section 26(1) or Section 25(3)

Analysis:
1. The case involved a dispute regarding the disallowance of a claimed bad debt amount of Rs. 27,768 in the account of Haji Sikandar Khan. The Income Tax Officer initially disallowed the claim stating it was a partnership loss not proved and the debt had not yet become bad in the relevant year. The Assistant Commissioner and Commissioner also disallowed the claim. However, the High Court found that the debt became bad on July 10, 1931, and should have been allowed as a bad debt under Section 10(2)(ix) by the Income Tax authorities. The Court concluded that the debt was not a loss pertaining to money-lending business but was a loss of capital invested in Haji Sikandar Khan's business, and there was no evidence to establish otherwise.

2. The second issue regarding the applicability of Section 26(1) or Section 25(3) was not pressed by the counsel for the assessee firm, and therefore, the Court did not provide a reply to it. The Court ordered that the assessee firm should be awarded costs from the Commissioner, indicating a favorable decision for the assessee firm in the case. The judgment clarified the nature of the debt, the timing of when it became a bad debt, and the lack of evidence to support the disallowance of the claimed amount. The decision highlighted the importance of proper evidence and legal provisions in determining the treatment of bad debts for income tax purposes.