1988 (12) TMI 146 - AT - Income Tax

Appellate Assistant Commissioner, Assessment Year, Bad Debt, Business Loss, Deduction In Respect, Income Tax Rules, Loss On Sale

Summary

Issues:
1. Deletion of provision for legal charges.
2. Allowance of bad debt.
3. Deletion of loss on sale of stocks and shares.
4. Interest on sticky advances.

Detailed Analysis:

1. Deletion of provision for legal charges:
The appellant, an Income-tax Officer, appealed against the deletion of an addition of Rs. 30,000 representing a provision for legal charges. The Commissioner(A) allowed the claim, stating it was for an ascertained liability arising during the accounting year. The Income-tax Officer disallowed it, not for lack of details but because they were not furnished before him, although they were presented before the Inspecting Asstt. Commissioner and the Commissioner(A). The Tribunal found no grounds for the department to appeal, as the nature and ascertainment of the liability were confirmed by the Commissioner(A) and the Inspecting Asstt. Commissioner. The appeal on this ground was rejected.

2. Allowance of bad debt:
The next ground involved the allowance of a bad debt of Rs. 1,29,780, objected to on the basis that additional evidence was accepted against Rule 46A. The bad debt was due from a party and was written off. The Income-tax Officer noted that details were not furnished before him and the ground was not pressed before the Inspecting Asstt. Commissioner. The Commissioner(A) allowed the claim without proper adherence to Rule 46A. The Tribunal held that the Commissioner(A) was not justified in entertaining the ground without following the rules. The objection was upheld, and the finding of the Commissioner(A) on this point was reversed.

3. Deletion of loss on sale of stocks and shares:
The third ground related to the deletion of an addition of Rs. 1,10,493 representing a loss on the sale of stocks and shares, which the assessee bank claimed as a revenue account. The Commissioner(A) allowed the claim based on previous assessment year findings. The Tribunal found this reliance on a past assessment year to be inadequate, as the circumstances could have changed over the years. The lack of discussion on relevant facts in the Commissioner(A)'s order led the Tribunal to disagree with the decision. The view taken by the Commissioner(A) on this point was not upheld by the Tribunal.

4. Interest on sticky advances:
The final objection was against setting aside the assessment on the interest on sticky advances, directing re-examination in light of a previous year's order. The Tribunal referred to a Supreme Court decision, holding that the interest on these advances was taxable income, not contingent interest. The Tribunal decided in favor of the Revenue, stating that the interest is taxable based on the Supreme Court decision. The appeal was allowed in part, with the decision favoring the Revenue on this point.