1979 (12) TMI 31 - HC - Income Tax

Summary

Issues:
- Whether the assessee was entitled to the deduction of loss on the sale of machinery under section 32(1)(iii) of the Income-tax Act, 1961?
- Whether the Tribunal's view on the requirements of section 32(1)(iii) is sustainable in law?

Analysis:
The judgment pertains to an assessment year where the assessee, a firm, sold machinery resulting in a loss. The Income Tax Officer (ITO) initially allowed the deduction of the loss, but later withdrew it during reassessment under section 147 of the Income-tax Act. The main contention revolved around the interpretation of section 32(1)(iii) concerning the actual write-off of the loss in the books for the relevant year as a condition precedent for allowance. The Appellate Assistant Commissioner (AAC) held that the loss need not be written off in the same year, and the Tribunal upheld this view, emphasizing that the sale proceeds were entered in the books, reflecting the deficiency. The Commissioner of Income-tax challenged this decision, arguing that the proviso to section 32(1)(iii) necessitates a write-off in the same year for eligibility. The judgment delves into the interpretation of the proviso and compares it with provisions in other sections, highlighting that the statute does not explicitly require the write-off in the same year. The court emphasized substantial compliance with statutory provisions and found that the assessee had complied by recording the loss on the first day of the subsequent year. Reference was made to prior case law to support the interpretation that the actual write-off in the same year was not a strict requirement for allowance. The court concluded that the assessee met the statutory requirements and upheld the allowance of the loss. The judgment also addressed references to other legal precedents, clarifying their relevance to the present case. Ultimately, the court answered the first question in favor of the assessee, indicating compliance with statutory provisions and did not address the second question due to the assessee's fulfillment of requirements. The assessee was awarded costs, including counsel's fee.