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TMI Blog1966 (6) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax, Bangalore, in the following circumstances : The assessee was carrying on a business as distributor and exhibitor of pictures. According to the statement of the case, the ordinary mode of carrying on the business was to advance monies to the producers of pictures and to obtain from them, in consideration of the monies advanced, rights of distribution in specified areas. There was an agreement on June 13, 1951, between the assessee and a certain Thyagaraja Bhagavathar under which there was an acquisition of the rights of distribution of a picture known as Shyamala in the districts of Trichy and Coimbatore. Under that agreement, a sum of Rs. 50,000 was advanced by the assessee to Thyagaraja Bhagavathar. The condition regulating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee debited his profit and loss account with that sum of money and credited it to a bad debt reserve account. This sum of Rs. 41,915 was, according to the assessee, a trading loss but the Income-tax Officer disallowed it. But the Appellate Assistant Commissioner allowed the deduction of a sum of Rs. 36,300 in respect of that matter. The assessee claimed a deduction of another sum of Rs. 2,500 As the expenses incurred in the litigation, and, here again, it was disallowed by the Income-tax Officer but allowed by the Appellate Assistant Commissioner. From this decision of the Appellate Assistant Commissioner, there was an appeal to the Income-tax Appellate Tribunal by the Income-tax Officer which was dismissed. Both the Tribunal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding of the Tribunal was that the sum of Rs. 50,000 was advanced by the assessee to Thyagaraja Bhagavathar under the agreement under which there was an acquisition of the right of distribution in respect of the film produced by Thyagaraja Bhagavathar. The advance was made in the context of the acquisition of the right for distribution, and the agreement provided for its repayment in a particular way. A debt so advanced for the acquisition of the right of distribution in the course of a business, which the assessee was conducting as a distributor and exhibitor of pictures, is clearly a debt due to him in respect of the business within the meaning of section 10(2)(xi) of the Indian Income-tax Act, 1922. Mr. Swaminathan appearing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deduction of the amount of that loss from the gross profits. That indeed is also what is enjoined by section 10(2)(xi). That being the position, the Appellate Tribunal was right in concluding that there was trading loss attributable to the irrecoverable character of the debt which concerned the business of the assessee. What the Supreme Court observed in Indore Malwa United Mills Ltd. v. State of M. P. in which a similar question arose for decision reads : "We, therefore, find no difficulty in holding that the said debt which had become irrecoverable was a trading loss deductible in computing the profits of the appellant-company in the assessment year. It was a loss incidental to the appellant's business and is certainly sanctioned b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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