TMI Blog1946 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of money-lending business as contemplated in Section 10(2)(xi) of the Income-tax Act, so that when such amount became irrecoverable, claim for such irrecoverable amounts may be admissible in computing the assessable income of the assessee. The question formulated arose out of assessment proceedings of the assessee for the years 1942-43 and 1943-44, and although a single reference has been made, it is necessary to state the facts for the year 1942-43 assessment first. The assessee carries on business as a money-lender and also has a large zamindary. When the tenants of the assessee fell in arrears in paying his agricultural rent, he instead of suing them in the civil Courts obtained handnotes and mortgage bonds from a large num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a further income of ₹ 24,000. I think the sum added by the Income-tax Officer is very high. The so-called omissions and discrepancies as noted by the Income-tax Officer have been satisfactorily explained in most cases. But in the case of Bajrang Prasad Singh ₹ 2,645 interest income has to be taxed. Besides for possible omissions to show interest bearing investment as in the case of documents worth ₹ 67,000 obtained from tenants in lieu of arrear rents a further sum of ₹ 10,000 may be added. There is no excuse for omitting to show investment worth ₹ 67,000 on documents obtained from agricultural tenants. Hence, ₹ 12,645 will have to be added in this case against ₹ 24,000 added by the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability ceases to be rent and becomes a loan. If the Income-tax Officer had taxed the interest on arrear rent under other source the position would have been different but as the income has been taxed under money-lending, I am afraid the position taken by the Income-tax Officer cannot be supported. Therefore ₹ 2,265 will be allowed. It is, therefore, clear that in this year also the Income-tax department actually taxed the assessee on a sum of ₹ 1,293 on account of the interest which accrued due on these investments made with the agricultural tenants and this interest was taken as income from money-lending. In the year 1942-43 which relates to the accounting period March, 1941, to March, 1942, the assessee claimed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had shown that he had remitted a larger sum than this amount, no income under this head was taken as a part of the assessable income. This order was passed on the 23rd of March, 1943. The appeal was disposed of by the Appellate Assistant Commissioner on the 27th of February, 1944, and this particular question was discussed at page 18, paragraph 7. He observed that these debts arose out of contracts relating to agricultural matters and the assessee had not shown to him that they had even figured as stock-intrade in the money-lending business being the assessed subject. In this view of the matter he upheld the Income-tax Officer's order disallowing the claim for these bad debts some on the ground of point of time and the others be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late order of the Appellate Assistant Commissioner, and the 1941-42 appellate order of the Appellate Assistant Commissioner they observed at page 2: It cannot, therefore, be said that these orders are conclusive of the fact that these officers proceeded on the footing that the bonds and pronotes were a part of the appellant's money-lending business after they were taken in lieu of arrears of agricultural rent. Accordingly they have given their opinion that it could hardly be said that the department treated these bonds and promissory notes as ordinary money-lending transactions and, therefore, the department was now debarred from treating them otherwise. In our opinion, this view of the Appellate Tribunal is wrong. The Income-tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the course of his money-lending transaction. The answer to the question is in the affirmative. The assessee must be given a deduction for ₹ 3,292 on account of bad and irrecoverable loans during the assessment year 1942-43. The assessee is entitled to have his costs which we assess at ₹ 250. The Appellate Tribunal will also return to the assessee the fee of ₹ 100 deposited by him. For the assessment year 1943-44 the facts are exactly the same. In this case the assessee's claim for a deduction of ₹ 2,461 on account of bad and irrecoverable debts in the village investments must also be allowed for the reasons just given. We do not make any separate order for the costs of this Court in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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