9911796707
TMI Blog1983 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... not apprised of the cuts. The books of the partnership showed that a sum of Rs. 27,393.75 was due from the Gun Carriage Factory as on April 1, 1969. The assessee company took over the business, assets and liabilities of the partnership and this included the sum of Rs. 27,393.75 due from the Gun Carriage Factory. Out of this sum of Rs. 27,393.75, the assessee realised a sum of Rs. 6,025.50 on May 24, 1970. Thereafter, in spite of repeated requests and reminders, the assessee was unable to realise the balance of Rs. 21,368 as the Gun Carriage Factory maintained that this amount represented cuts in the bills for the defective goods supplied. The assessee wrote off this amount of Rs. 21,368 as bad and irrecoverable and made a claim for allowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a consequence of information in his possession, had reason to believe that the claim for bad debt was wrongly allowed in the original assessment and, therefore, the reopening of the assessment by the ITO was quite in order and that since the bad debt did not consist of a loan advanced in the ordinary course of banking or money-lending business of the assessee and it had not been taken into account in computing the income of the assessee for the accounting year relevant to the assessment year under reference or of an earlier accounting year, the disallowance of the claim for bad debt was quite in order. On these conclusions, the appeal of the assessee was dismissed. At the instance of the assessee, the Tribunal has referred the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, answer question No. 1 in the affirmative and against the assessee. The learned counsel for the assessee next contended that even assuming that question No. 1 is answered against the assessee, yet the view taken by the authorities below for the disallowance of the claim for bad debt written off made by the assessee is erroneous in law, especially when the Tribunal had rested its conclusion mainly on the ground that the assessee who claimed the benefit of the allowance for bad debt was not the same as the assessee who had incurred the debt. Strong reliance, in this connection, was placed by the learned counsel for the assessee on the decisions in CIT v. Veerabhadra Rao, K. Koteeswara Rao and Co.[1976] 102 ITR 604 (AP ), Addl. CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -off and allowance with reference to a bad debt incurred by the predecessor but taken over by the successor, namely, the assessee. Whatever might have been the position under the Indian I.T. Act, 1922, under the relevant provisions of s. 36 of the 1961 Act, this question had arisen in a series of decisions of this court as well as other courts and the view has been uniformly expressed that the successor can have the benefit of allowance for the write-off of a bad debt relating to the business of the predecessor which business was taken over by the successor. We may make a brief reference to those cases. In CIT v. Veerabhadra Rao, Koteeswara Rao and Co. 1976] 102 ITR 604 (AP), the successor-firm after having taken over the assets and liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being the original creditor but the taking into account of the debt in computing the income of the same business. In doing so, the court observed as follows (p. 357): " If in a given case, the income of a business is computed by taking into account certain debts, it does not appear reasonable that, in the absence of any statutory prohibition, allowance on account of the debt having become bad should be denied only because the assessee's identity has changed, though the identity of the business continues." We are of the view that the aforesaid observations squarely apply to the facts of the present case. Again in Krishnamurthy and Son v. CIT (Tax Case No. 6.58 of 1976, dated March 25, 1981), Balasubrahmanyan J., after exhaustively dealing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 123 ITR 755, relied upon by the Revenue. We are of the view that it did not decide the question of write-off and the allowance of bad debt in the hands of the successor-assessee of a business. In that case, a bad debt was written off, regarding which an allowance was also granted in prior year of assessment but the debt was subsequently recovered. When the allowance was granted, the business was being carried on by a firm. That was subsequently dissolved. A new partnership came into existence which collected the debt written off earlier as a bad debt and in respect of which an allowance had already been granted. In this situation, s. 41(4) of the Act was sought to be applied for the purpose of bringing to charge the debt realised by the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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