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Issues:
Appeals against AAC of Wealth-tax, Allahabad's consolidated order for asst. yrs. 1970-71 to 1974-75 regarding the treatment of loans advanced by the ex-Raja to firms with ex-employees as partners as bad debts for deduction in income-tax assessments and exclusion from net wealth assessments. Analysis: The appeals dealt with the treatment of loans advanced by the ex-Raja to firms with ex-employees as partners as bad debts for deduction in income-tax assessments and exclusion from net wealth assessments. The ex-Raja claimed that certain amounts from the loans were not recoverable and should be considered as bad debts. The ITO, however, did not accept this claim, including the full outstanding amounts in the ex-Raja's net wealth. The AAC upheld the ITO's decision, leading to the appeals before the ITAT Allahabad-B. The ex-Raja's counsel argued that efforts were made to recover the debts, but the firms had closed due to losses, and partners expressed inability to repay. Affidavits and reports supported the claim of bad debts. No legal action was taken to avoid tarnishing the ex-Raja's reputation. The departmental representative contended that without security or legal steps for recovery, the full amounts should be included in the net wealth. The ITAT considered whether the claimed unrecoverable amounts had any value and should be included in the net wealth. Reports and affidavits confirmed the firms' closure and partners' financial distress, supporting the ex-Raja's claim of bad debts. The ex-Raja's status and reputation were factors in not pursuing legal action. ITAT concluded that, except for a specific amount promised for repayment, the ex-Raja had lost hope of recovery from the debts. Therefore, only the recoverable amount was considered as an asset for net wealth, and the rest was not included. The addition of the full outstanding amounts by Revenue authorities was deemed unjustified and deleted. In conclusion, the ITAT allowed the appeals, ruling in favor of the ex-Raja regarding the treatment of the loans as bad debts for income-tax deductions and exclusion from net wealth assessments.
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