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TMI Blog1978 (10) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 17,885 towards the end of that accounting year. This amount was carried forward to the next year and the amount along with the interest came to Rs. 18,895. That amount was carried forward again to the Asst. yr. 1972-73 and was finally written off during the Asst. yr. 197374 as the trade debtor was not in a position to pay the dues. In this connection, the assessee produced a letter dt. 25th June, 1972 written by the debtor which is as follows :- "As on Diwali, S.Y. 2027, I had to pay to you a sum of Rs. 18,895.39 towards business dealings I had with you in the previous years. I have already made payment of Rs. 500 against the above dues. You have been pressing on me for payment of the balance, but I am very frank to state since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be impossible to collect any money from him. He, therefore, upheld the ITO' s action. 4. It was argued before us that the debtor was not in a position to pay the assessee's dues and that the assessee considered it commercially prudent to write off the debt. If at all the debtor made any payment, in future years it was open to the ITO to tax the amounts as income of the assessee under the provisions of the IT Act. It was, however, a fact that the assessee took a reasonable action in writing off the amount in view of the parilous financial condition of the assessee. The Departmental Representative, on the other hand, relied on the findings of the AAC. 5. Looking to the contents and tenor of the debtor's letter, it would appear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that therefore, there was no reason why the ITO should have disbelieved the assessee only this year. It was contended that deterioration in the quality of oil was a normal or natural phenomenon and that an estimate of 4 percent. loss towards the deterioration in the quality of the oil should have been accepted by the lower authorities. On the other hand, the Departmental Representative relied on the findings of the lower authorities. 9. In our opinion, further inquiries are necessary in the matter as the assessee has drawn our attention to the fact that in the subsequent years the ITO himself allowed some loss on the ground of deterioration in the quality of the oil. The ITO also may find out whether in other comparable cases simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO' s case that part of the borrowals were diverted for the personal purposes of the partner concerned. His case was that the partnership should have charged interest on the debit balance in the capital account of the partner. The AAC however, understood it to mean that a portion of the interest on the borrowals was disallowed by the ITO. We do not consider it to be so. Apart from this, the transfer of over Rs. 43,000 towards the end of the accounting year was instrumental in brining about the debit balance of Rs. 20,146. Therefore, even the arguments made use of by the AAC would be of no avail to the Department. The ITO' s action also cannot be sustained because the partnership cannot be compelled to charge interest on the debit bala ..... X X X X Extracts X X X X X X X X Extracts X X X X
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