1971 (1) TMI 19 - SC - Income Tax

Whether the disallowance of the bad debt is right in law - finding of the Tribunal that the amounts sent to Bombay were not advanced in the course of money-lending business or any other business was a finding of fact. Such finding was supported by evidence on record and was therefore binding on the court - appeal of assessee is dismissed

Summary

Issues Involved:
1. Disallowance of bad debt of Rs. 2,68,385.
2. Determination of whether the debt was incurred in the course of the money-lending business or other business of the assessee.

Issue-wise Detailed Analysis:

1. Disallowance of Bad Debt of Rs. 2,68,385:
The appellants, a firm engaged in business and money-lending, claimed a bad debt deduction of Rs. 2,68,385 due from a Bombay firm. The Income-tax Officer disallowed this claim, stating that the transactions were mere accommodations unrelated to the assessee's regular business. This decision was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The High Court of Madras also affirmed this view, stating that the debt was not incurred in the course of the assessee's money-lending business or any other business. The Supreme Court reframed the question to determine if the Tribunal erred in disallowing the debt written off as irrecoverable.

2. Determination of Whether the Debt was Incurred in the Course of Money-lending Business or Other Business:
The Tribunal's initial order lacked detailed reasoning, prompting the Supreme Court to call for a supplementary statement. Upon review, the Tribunal reiterated that the sums in question were not loans made in the ordinary course of the money-lending business nor related to any other business of the assessee. The Tribunal's findings were based on several factors, including the nature of the transactions, the failure to adjust interest when the Bombay firm became a debtor, and the explanations provided by the assessee.

The Tribunal's supplementary statement confirmed that the advances were not loans in the ordinary course of the assessee's business. Despite the appellants' arguments, the Tribunal's findings, supported by evidence, were binding. Consequently, the Supreme Court concluded that the Tribunal did not err in disallowing the bad debt, thereby dismissing the appeal.

Conclusion:
The Supreme Court upheld the Tribunal's decision, confirming that the debt of Rs. 2,68,385 was not incurred in the ordinary course of the assessee's money-lending business or any other business. The appeal was dismissed, and the disallowance of the bad debt stood affirmed.