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TMI Blog1967 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... n Income-tax Act, 1922 : "Was the claim of Rs. 15,700 written off in the circumstances mentioned above, a permissible deduction as a bad debt ? " Narang Industries Limited (hereafter referred to as the assessee-company) is a public limited company owning a distillery. The assessee-company mainly derives its income from running a distillery. In 1947, one Shri Prem Singh approached the assessee-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h ; and (d) that all the sales and purchases of the building material and manufactured goods will be carried out by Shri Prem Singh in consultation with the chairman of the assessee-company. The arrangement was to last for the duration of the first lease of the land to be acquired for the purposes of the kiln but it could be renewed by mutual agreement. Clause 7 of the letter reads: " You will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under the compromise the assessee-company was paid Rs. 5,000 and two claims of Rs. 3,063 and Rs. 2,950. Nothing, however, could be recovered on these claims and Rs. 15,700 remained due to the assessee-company. The said amount of Rs. 15,700 was written off in the accounting year relevant to the assessment year 1956-57 with which we are concerned. It is relevant to point out that the learned subor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 that there was a relationship of partnership between the parties. We agree with the Appellate Assistant Commissioner that, in the circumstances of the case, the debt could not have been allowed as a claim of bad debt. Mr. B. N. Kirpal, the learned counsel for the assessee-company, based his argument mainly on the observation of the Tribunal quoted above and said that the Tribunal had expressed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany intended to carry on the new business in partnership with Shri Prem Singh or otherwise. Section 10(2) can have no applicability in these circumstances. The learned counsel for the assessee-company then argued that the loss could be allowed under section 10(1). Since we have held that the loss was not incidental to the assessee-company's business but was of a capital nature, section 10(1) is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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