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TMI Blog1940 (11) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, are a registered firm constituted by two brothers Lal Chand and Kharaiti Ram, sons of Deoki Nandan. The karta of the family, Deoki Nandan, died on 28th February, 1927, but the family continued, up to the assessment for 1932-33, to be assessed as an undivided Hindu family. In the assessment for 1933-34 it was claimed that the family had disrupted as from 10th July, 1933. Its immovable property had been divided equally between the two brothers by a registered partition deed, dated 10th July, 1933, which made no mention of the business or the movable property. By a deed of partnership of the same date, however, the two brothers stipulated as follows regarding the family's moneylending business : (a) that they were responsible in eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 924-25. The debtor was declared insolvent in 1925 and thereafter the following amounts were received pro rata from the Official Receiver : Rs. A. P. 20th August, 1931 ... 3,161 14 0 26th June, 1934 ... 632 6 0 24th August, 1935 ... 1,264 12 0 11th June 1936 ... 151 12 6 ----------------------- Total ... 5,210 12 6 Amount written off ... 12,789 3 6 ----------------------- 18,000 0 0 ----------------------- The claim was disallowed by the Income-tax Officer and his decision was upheld by the Assistant Commissioner on appeal. Copies of the relevant portions of their orders are appended as Exhibits ' A ' and ' B '. The assessee then applied under Section 66 (2) for a reference to the High Court. This application was rejected b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the family up to the date of disruption on 10th July, 1933, was made as if it was a case of partition and not of succession and the parties have acquiesced in it. This, however, does not alter the answer to the question. The assessment to income-tax is concerned with the profit or loss of a particular account year, and in determining this question, the income-tax authorities are in duty bound to see that any loss claimed really relates to that year. I therefore submit that the answer to the question propounded should be that the income-tax authorities were not bound to accept the book valuation given by the assessees but are entitled to determine the income of the year on the assumption that the successor to the business took over th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, ₹ 12,789-3-6, in the accounting period of 1936-37. The learned Income-tax Officer and the learned Assistant Commissioner on appeal rejected this contention on various grounds, which do not concern us. The learned Income-tax Commissioner, however, rejected the revision petition before him on the ground that the debt of ₹ 18,000 had become bad to a certain extent in 1933, the year when the Hindu joint family dissolved. The extent of the badness of the debt, according to him, was to be measured by the amount received up till 1936 during the course of insolvency proceedings. Therefore, according to the learned Commissioner, the assessee was not entitled to write off the sum of ₹ 12,789-3-6 as a bad debt in that year at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken it not at its book value when he knew that the debtor had become insolvent eight years before, but would have taken it at its real or market value. The same consideration in his opinion applied to the members of the joint family which did, as a matter of fact, take over these assets and, therefore, according to him, they were bound to value these assets in their new books not at the value given in the Hindu joint family books but at the real market value and therefore there was no question of any bad debt having arisen after 1933. This opinion does not appear to me to be correct. There is no law that I am aware of which refuses a right to any man to value what he purchases or takes at any value that he considers fit, however stupid or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which again might be a varying factor. It was, therefore, not possible to hold that the market value in 1933 could be determined by the amount received as dividend in 1936. On this ground alone, it is sufficient for the purpose to say that the order of the Income-tax Commissioner could not stand. The learned Counsel for the Income-tax Department, has however, referred us to Bissendoyal Doyaram, In re ((1938) 6 I. T. R. 165). That ruling was relied on for the purpose of showing that in such circumstances the loss, if any, would be a loss to capital and not to the business and, therefore, would not enter into consideration for the purposes of assessment. This argument can be rejected in the circumstances of this case on the short ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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