9911796707
|
Home
Issues: Allowability of deduction under Section 10(2)(xi) of the Indian Income Tax Act for irrecoverable debts in a joint Hindu trading family's money-lending business.
Analysis: The judgment delivered by the High Court of Madras pertains to the allowability of a deduction claimed by the assessee, who is the manager of a joint Hindu trading family, for three irrecoverable debts totaling &8377; 8,855 in the assessment year 1942-43 under Section 10(2)(xi) of the Indian Income Tax Act. The assessee received certain promissory notes as part of its share from a dissolved money-lending partnership with Chinni Veeraswami Chetti. These debts were considered good at the time of dissolution and were included in the family's money-lending business books. Over the years, the promissory notes were renewed, and interest was paid, which was taxed as part of the family's profits. The Income Tax authorities initially rejected the deduction claimed by the assessee, but the Income Tax Appellate Tribunal, Madras Bench, upheld the claim. The Tribunal referred the question to the High Court under Section 66(1) of the Act to determine the allowability of the deduction. Section 10(2)(xi) allows deductions for irrecoverable loans made in the ordinary course of a money-lending business, not exceeding the amount actually written off as irrecoverable in the assessee's books. In this case, all three debts were written off and deemed irrecoverable by the Commissioner of Income Tax. The Commissioner contended that the loans were not made in the ordinary course of the family's business but were part of the dissolved partnership's activities. However, the Court held that since the debts were allotted to the family upon dissolution and were treated as assets of the family's business, they qualified for the deduction under Section 10(2)(xi). The Court highlighted that the loans had been consistently treated as part of the family's business since 1933, and previous assessments had allowed similar deductions for irrecoverable debts received from the partnership. The Court distinguished a previous decision of the Calcutta High Court cited by the Commissioner, stating it was not directly applicable to the present case due to differing facts. The Court ruled in favor of the assessee, allowing the deduction of &8377; 8,855 under Section 10(2)(xi) for the assessment year 1942-43. Additionally, the Commissioner was directed to pay the assessee's costs amounting to &8377; 250. The judgment provides clarity on the interpretation and application of provisions related to deductions for irrecoverable debts in the context of a joint Hindu trading family's money-lending business.
|
