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Issues:
Whether the Tribunal was justified in disallowing the claimed bad debt of Rs. 9,000 by the assessee. Analysis: The judgment by the Andhra Pradesh High Court dealt with a question referred under section 66(1) of the Indian Income-tax Act, 1922, regarding the disallowance of a bad debt claimed by the assessee. The case involved a partner who financed a firm of which he was a partner, raising the issue of whether such financing could be considered a money-lending business. The assessee maintained account books recording borrowed amounts for advancing to the firms, showing a loss under the business head due to interest payments and the bad debt in question. The specific bad debt in question was related to an advance made to a Hindu undivided family, which was later repaid, followed by fresh advances to individual brothers who later filed insolvency petitions. The Tribunal disallowed the bad debt claim primarily on the grounds that financing the firms could not be considered part of a money-lending business and that interest received was part of the assessee's share income. However, the High Court disagreed with this view, citing Section 13 of the Partnership Act, which recognizes partners advancing money to the firm and being entitled to interest. The High Court concluded that a partner advancing money to a firm could indeed be considered a creditor and engaged in money-lending business, rejecting the Tribunal's view. However, due to the lack of evidence on record regarding whether the advances constituted money-lending business in this specific case, the Court directed the Tribunal to reconsider the case in light of the judgment. The first question was answered in favor of the assessee, and each party was directed to bear their own costs. In summary, the judgment clarified the legal standing of partners advancing money to firms and the entitlement to interest, overturning the Tribunal's decision to disallow the bad debt claim. The Court emphasized the partner's position as a creditor and the possibility of engaging in money-lending business, highlighting the need for evidence to determine the nature of the advances in each case.
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