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TMI Blog1992 (1) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... the tea supplied to them. This amount was written off by the assessee on August 31, 1976, and was claimed as a bad debt. For the sale of the business of the assessee, permission of the Reserve Bank of India was required and, therefore, the assessee applied to the Reserve Bank of India for permission for the sale pursuant to the agreement. But the Reserve Bank of India refused permission. By letter dated August 11, 1976, the Reserve Bank of India granted permission to Messrs. Ram Bahadur Thakur Pvt. Ltd. to purchase the entire undertaking of the assessee in India. Consequently, the Indian undertaking of the assessee was transferred to Messrs. Ram Bahadur Thakur Pvt. Ltd. (hereinafter to be called "R. B. T."), with effect from September 1, 1976. A day before the transfer of the undertaking, i.e., on August 31, 1976, the assessee wrote off the amount of Rs. 40,81,140 due from Chennai Bottling Co. Pvt. Ltd. and others for the sale of tea to them and the assessee claimed the said amount as a deduction on account of bad debt. The Income-tax Officer took the view that the debt cannot be considered to have become bad by the end of the accounting period in question and that legal proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 11,36,779 as a revenue loss in respect of the sale of the current assets is allowable ?" We heard Sri N. R. K. Nair, counsel appearing for the assessee (sic), and Sri P. K. R. Menon, on behalf of the Department. The question posed at the instance of the assessee relates to the disallowance of deduction of Rs. 40,81,140 claimed as a bad debt. The Income-tax Officer found that the assessee sold tea to five concerns in terms of the contracts entered into with them in 1974. The entire proceeds of the sales made to each one of them were credited in different sales accounts and were considered and taxed as the assessee's income in the year of sale. But those concerns disputed a portion of the amount which came to a total of Rs. 40,81,140. It is an admitted fact that the assessee did proceed against each of the said concerns. The assessee's successor in business, viz., R. B. T., pursued the attempt to recover the amount. The plea taken before the Incometax Officer by the assessee that, as far as the assessee was concerned, the amount had become a bad debt was not accepted by the Income-tax Officer. Several legal proceedings were on and there was no reason to treat the amount as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Incometax (Appeals) and the Tribunal is that there is no material to show that the debt had become bad in the accounting year in question. With respect to the claim based on business loss, the Tribunal found that, by writing off the amount on the day previous to the sale, the assessee only reduced the total loss arising out of the sale. The loss, therefore, was not a business loss. It was only a capital loss. Since it was a capital loss, the claim of the assessee for deduction of the amount as a business loss was rejected. These findings of fact, viz., that there is no material to show that the debt had become bad and that the loss was a capital loss, have not been challenged before us by raising specific questions. Therefore, both the questions raised at the instance of the assessee have to be answered in the affirmative, against the assessee and in favour of the Revenue. The question referred at the instance of the Revenue relates to the allowance of deduction of Rs. 11,36,779 as a revenue loss in respect of the current assets. The Income-tax Officer disallowed the claim of the assessee. The Commissioner of Income-tax (Appeals) found that the amount of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1960] 39 ITR 104 (Mad) and Bank of Bihar Ltd. v. CIT [1962] 45 ITR 427 (SC). But it is well-settled that all questions of fact are for the Tribunal to decide and this court cannot go behind the Tribunal's findings on facts. This court cannot go behind or question the statement of facts made by the Tribunal unless there is no evidence to support them or the Tribunal has misdirected itself in law. Further, the court cannot disturb the finding of fact given by the Tribunal even if there is no evidence to support it unless the assessee challenges the findings of fact by raising specific questions on that issue. (See India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC), Hazarat Pirmahomed Shah Saheb Roza Committee v. CIT [1967] 63 ITR 490 (SC), CIT v. Sri Meenakshi Mills Ltd. [1967] 63 ITR 609 (SC), CIT v. Greaves Cotton and Co. Ltd. [1968] 68 ITR 200 (SC), CIT v. Madan Gopal Radhey Lal [1969] 73 ITR 652 (SC) and Aluminium Corpn. of India Ltd. v. CIT [1972] 86 ITR 11 (SC). Whether a debt is bad and in which year the debt has become bad are all questions of fact and the findings of the Tribunal on those issues will be disturbed by the court only if there is no evidence to support them o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has become bad will have to be determined by the fact-finding authority. Of course, it has been held that a trading loss has a wider connotation than a bad debt. A bad debt which cannot be written off may be allowed as a trading loss, provided the loss is incurred wholly and exclusively for the purpose of the business of the assessee. Counsel for the assessee referred to the decision in Lord's Dairy Farm Ltd. v. CIT [1955] 27 ITR 700 (Bom) for the proposition that when the assessee wrote off the amount, that is prima facie evidence that the amount is irrecoverable. But this decision will not help the assessee, for there is a definite finding of fact against the assessee that the assessee has not adduced any evidence to show that the debt had become irrecoverable. There was also evidence before, the Tribunal to the effect that the assessee was trying to recover the amount in arbitration proceedings. The innuendo also is there to the effect that the debt has been written off to compensate the debtors in satisfaction of their claims for damages arising out of breach of contract. Hence, the decision in Lord's Dairy Farm Ltd. v. CIT [1955] 27 ITR 700 (Bom) referred to above will not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves Cotton and Co. Ltd. [1968] 68 ITR 200, the Supreme Court held that the High Court is not a court of appeal in a reference under the Income-tax Act and it is not open to the High Court in such reference to embark upon a reappraisal of the evidence and arrive at a finding of fact contrary to the one arrived at by the Tribunal. The duty of the High Court is to confine itself to the facts as found by the Appellate Tribunal and to answer the question of law referred to it on those facts. If the finding of fact is defective in law and if there is no evidence in support of it, the assessee has to apply for a reference of the specific question challenging such a finding of fact. Further, in India Cements Ltd. v. CIT [1966] 60 ITR 52, it is laid down by the Supreme Court that, in a reference, the High Court must accept the findings of fact made by the Appellate Tribunal and it is for the person who has applied for a reference to challenge these findings first by an application under section 66(1). If he has failed to file an application under section 66(1) expressly raising the question about the validity of the findings of fact, he is not entitled to urge before the High Court that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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