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TMI Blog2007 (3) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... of its order dated December 5, 1980, in I. T. A. No. 592(Asr)/1979 for the assessment year 1975-76 "1. Whether, on the facts and in the circumstances of the case, while rightly affirming the order of the Commissioner of Income-tax (Appeals) rejecting the assessee's claim of deduction of Rs. 4,15,944 as bad debt under section 36(2) of the Income-tax Act, 1961, the Appellate Tribunal is right in law in allowing the same as trading loss incurred by the firm under section 37 of the Act? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in holding that the agreement dated October 1, 1973, between the principal M/s. Central Distillery and Chemical Works Ltd., and the assessee-firm stood modified by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of running of its business or incidental thereto is vitiated by consideration wholly irrelevant and inadmissible and ignoring of all the relevant material on the record ?" 2 Briefly the facts, as noticed by the Tribunal in the statement of case, are that the assessee was a partnership firm working as sole-selling agent of M/s. Central Distillery and Chemical Works Ltd. (for short "the principal") for sale of Indian made foreign liquor. While filing the return for the assessment year in question, the assessee claimed bad debt to the tune of Rs. 4,35,243 in respect of the following constituents : (Rs.) 14,500 4,15,944 4,622 177 Ramesh Films, Gauhati M/s. Nagaland Liquor Store, Dhampu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verable from the assessee. In return the assessee used to get commission on sales. It is further noticed that M/s. Nagaland Liquor Store had been receiving supplies of liquor worth lakhs, however, because of change in the Government in Nagaland in 1975, the licence of M/s. Nag Liquor Store was not renewed which fotced it to close its business. As the amount could not be recovered by the principal in the absence of assets to secure the same, it was debited to the account of the assessee. The assessee referred to and relied upon the clause as agreed to between the principal and the assessee vide letter dated October 31, 1973, to substantiate his claim. The same is extracted below : "This is in continuation of our letter of agreement dated O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had the effect of modifying the agreement related to outstanding under that agreement and could not relate to earlier years. He submitted that the finding of the Commissioner of Income-tax was not only correct but also reasonable and did not require any interference. 11. Having heard the rival views and their respective contentions we are not inclined to agree with the contentions of the Revenue and support the findings of the Commissioner of Income-tax (Appeals). Although we hold that the claim for bad debt raised as an alternative plea by the assessee is not made out in law and is, therefore, liable to be rejected, we cannot but uphold the claim for trading loss. We agree with the Commissioner of Income-tax that for a bad debt to succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated May 16, 1974. The relevant portion is reproduced : ____ 'We are also debiting the entire amount due from M/s. Nagaland Liquor Stores to your account and the necessary debit advice will be forwarded to you in due course. . .' ." 6 Though as many as five questions have been proposed, however, in sum total the issue remains as to whether the assessee is entitled to deduction of Rs. 4,15,944 as a business loss on account of amount irrecoverable from M/s. Nagaland Liquor Store ? 7 In the present case, it is not in dispute that the assessee was working as sole-selling agent of the principal. It has also come on record that for carrying out its obligation as a sole-selling agent, commission was being paid to it by the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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