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Claim for bad debt deduction for assessment year 1965-66 not allowed due to recovery from insurance company, subsequent recovery in assessment year 1966-67, additional ground raised before Tribunal for bad debt claim of Rs. 8,086, department's objection to the additional ground raised, Tribunal's justification in allowing the additional ground. Analysis: The judgment pertains to a banking company's claim for bad debt deduction in the assessment year 1965-66, which was initially disallowed due to a partial recovery from an insurance company. Subsequently, in the assessment year 1966-67, the company recovered an additional amount, leading to a revised claim of Rs. 8,086 as bad debt. The company raised an additional ground before the Tribunal for this claim, which was objected to by the department. The Tribunal, however, justified the allowance of the additional ground based on the statutory provisions of s. 36(2)(iii) of the Act, which allows for deduction of bad debts under certain conditions. The department argued that since the company did not raise the claim before the ITO or AAC, it could not be raised before the Tribunal for the first time. Additionally, it was contended that the Tribunal's decision for the assessment year 1965-66 should not bind the assessment for 1966-67. However, the Tribunal found that the statutory provisions under s. 36(2)(iii) and (iv) mandate the deduction of bad debts under specific circumstances, irrespective of when the claim was raised. The Tribunal's decision was supported by the interpretation of relevant legal principles and previous case law. The judgment referenced the case law and statutory provisions to establish that the ITO has a statutory duty to make deductions for bad debts as per the provisions of s. 36. It was clarified that the ITO can refuse to allow a bad debt written off in an earlier year in a subsequent year only if the assessee fails to establish that it became a bad debt in that year. The provisions under s. 36(2)(iii) and (iv) aim to relieve the assessee from the dilemma of claiming bad debts in specific years, even if the debt became irrecoverable in a different year. The Tribunal's decision to allow the additional ground for bad debt deduction was deemed justified based on these statutory provisions and legal principles. In conclusion, the Tribunal was deemed justified in allowing the company to raise the additional ground for bad debt deduction and in granting the claim of Rs. 8,086 as a bad debt. The judgment favored the assessee and ruled in their favor against the department. The company was awarded costs amounting to Rs. 250 for the legal proceedings.
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