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TMI Blog1990 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, the assessee claimed allowance for bad debts in the accounts of C. L. Badrinarayanan, and C. B. Lakshminarayanan and others, amounting to Rs. 40,254. The total amount due from the debtors referred to above was Rs. 62,000 and 50% of this amount, i.e., Rs. 31,000, along with court costs of Rs. 9,254, totalling Rs. 40,254 was written off in the books of account of the assessee. According to the assessee, the debtor had incurred heavy losses and had closed down their business and their properties had also vested in the official receiver owing to their adjudication as insolvents. The Income-tax Officer took the view that the write-off was premature, as the official receiver had not declared any dividend and disallowed the claim of the assessee for the write-off of this amount. On appeal by the assessee, the Appellate Assistant Commissioner also upheld the disallowance on the ground that there was no communication regarding the total assets and liabilities of the debtors and that the insolvency proceedings had also not become final. On further appeal by the assessee to the Tribunal, it took into account the several steps taken by the assessee in securing decrees by institution of suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affidavit of the assets and liabilities filed by the insolvents, there was an excess of assets over liabilities in a sum of Rs. 1,52,386. The first item of property valued by the insolvents at Rs. 4,00,000 had been let on an annual rental of Rs. 1,650 and the Tribunal rightly took the view that the valuation given by the debtors was exorbitant. The second item of property, it was noticed by the Tribunal, had been sold in the execution of a mortgage decree obtained in O. S. No. 397 of 1971 for Rs. 80,125 which was just sufficient to satisfy the claim of the mortgage-decreeholder. The third item of property valued by the debtors at Rs. 22,500 was originally sold in court auction in O. S. No. 191 of 1970 for a sum of Rs. 10,000, though the court sale was subsequently set aside. On the basis of the materials so made available by the assessee relating to the assets and liabilities of the insolvents, as per their affidavit of assets and liabilities filed in the course of the insolvency proceedings, the Tribunal found that the value of the first and the third items of properties, as given, could not be accepted, as the value had been exaggerated and that the liabilities exceeded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the debt even in 1929. It was held that there was no material to support the finding of the income-tax authorities that the debt had become bad even in 1929 and should have been written off in that year, but that on the materials, there was no justification whatever to hold that the assessee should have written off the debt, at any rate in 1934 and that the authorities were not justified in refusing to allow the assessee to write off the debt in 1936-37. This conclusion was arrived at on the view that the official assignee informed the assessee that there was no hope of any dividend and it was, therefore, not possible to say that the assessee should have written off the debt at an earlier stage. We are unable to understand the ratio of this decision as laying down that in every case, only after the receipt of an intimation from the official assignee to the effect that there is no chance of payment of any dividend, the assessee could proceed to write off and not before. We may point out that the question of write off has to be decided not solely on the basis of the impossibility of declaration of dividend, but also on a cumulative consideration of the facts And circumstances. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overable. Even so, the ultimate conclusion in that decision was rendered with reference to the non-availability of materials on record to sustain the view taken by the Tribunal that there was no hope of recovery of the amounts after 1941. Thus even this decision cannot assist the Revenue. In Chettinad Co. P. Ltd. v. CIT [1984] 147 ITR 724 Mad, in the course of the money-lending business carried on by the assessee, in respect of an advance made by the assessee, it obtained a decree and the debtor paid a small amount leaving a large outstanding. The first mortgagee of the debtor had instituted a suit for the recovery of the amounts due and the debtor had also gone into liquidation and the assessee-company wrote off in its books, in the accounting year relevant to the assessment year 1966-67, the entire amount due from the debtor and claimed the same as a deduction in the course of the assessment. That claim, however, was not countenanced by the Income-tax Officer and the assessee reiterated the same claim in the next two years, but this was also rejected by the Income-tax Officer and the rejection was also confirmed by the Tribunal as, in its view, even as late as 1973, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appropriate Tribunal, and not by the ipse dixit of anyone else. The assessee has no option of declaring a debt as bad .... In every case it is a question of fact, to be determined after consideration of all relevant circumstances". The above passage referred to in the decision of the Supreme Court also clearly establishes that the question whether a debt is a bad debt arid if so at what point of time, are essentially and purely questions of fact. Again, in TS. PL. P. Chidambaram Chettiar v. CIT [1967] 64 ITR 181 (Mad), after referring to the decisions in CIT v. Chitnavis [1932] 6 ITC 453 ; [1932] 2 Comp Cas 464, Bank of Bihar Ltd. v. CIT [1962] 45 ITR 427 (SC) and Nanak Chand Mamraj Mal v. CIT [1964] 52 ITR 410 (Punj), it was held that a debt became bad not because the assessee was minded to treat it so at a particular time but because at and from a particular point of time, it was no longer possible to recover, as the debtor had no means or assets to repay and the circumstances made it plain that recovery would not be possible and that if the official assignee had no assets of the insolvents in his hands, there was no reason why a creditor should wait until three years af ..... 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