1974 (12) TMI 3 - HC - Income Tax

Summary

Issues:
1. Whether a loss caused by the devaluation of a foreign currency is allowable as a bad debt.
2. Whether a debt due to the assessee from another company can be considered a bad debt.
3. Whether the Tribunal's decision on the irrecoverability of the debt was reasonable.

Analysis:
1. The first issue pertains to a loss of Rs. 4,996 due to the devaluation of a foreign currency. The court relied on previous decisions to conclude that such losses cannot be treated as bad debts. The court referenced CIT v. Mogul Line Ltd. and CIT v. Mehboob Productions Pvt. Ltd. to support this decision.

2. The second and third issues revolve around a debt of Rs. 62,078 owed to the assessee by another company. The court examined whether the debt had become irrecoverable prior to the assessment year. The assessee argued that the debt was still recoverable based on acknowledgments and other factors. However, the court upheld the Tribunal's decision that the debt had indeed become a bad debt before the assessment year. The court emphasized that the Tribunal's view was reasonable and not perverse.

3. The court analyzed the evidence before the Tribunal, which indicated that the debtor company had no assets left to repay the debt. The attempts by the debtor company's directors to restart the business were deemed vague and baseless. The court found that the Tribunal's decision on the irrecoverability of the debt was justified based on the lack of assets and the uncertain attempts to revive the debtor company's business.

In conclusion, the court answered all three questions against the assessee, confirming that the losses due to foreign currency devaluation cannot be treated as bad debts and upholding the decision that the debt owed by the other company had become irrecoverable before the assessment year. The assessee was directed to pay the Commissioner's costs of the reference.