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TMI Blog1971 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... In the books of account of the appellants which were maintained according to the mercantile system there was a current sarafi account in respect of their transactions with the Bombay firm in which were credited the funds transmitted from Bombay in respect of their business transactions. Entries relating to interest were posted till the end of Samvat year 2006 in the account on the amount due at the foot of the account. The following is a table showing the balances at the end of the Samvat years 2003 to 2008 and the interest charged thereon : Amount Interest At the end of Samvat year 2003 Cr. 16,051 00 -- " " " 2004 Dr. 1,02,188-4-5 Dr. 2,633-9-3 " " " 2005 Cr. 27,815-0-0 Dr. 483-1-9 " " " 2006 Cr. 11,975-0-0 Dr. 1,008-7-3 " " " 2007 Dr. 2,02,823-12-3 --- " " " 2008 Dr. 2,68,385-1-3 --- In the assessment for income-tax of the appellants for the assessment year 1952-53 relevant to the account year Samvat 2007 an item of Rs. 2,03,147-8-0 in the account of the Bombay firm was disallowed by the Income-tax Officer, but in appeal the amount was allowed. In the return of income for the assessment year 1953-54 the appellants claimed allowance for Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parts. A bad and doubtful debt due to the taxpayer, written off as irrecoverable in the books of account was properly allowable in computing the taxable profits from business, profession or vocation, where accounts were not kept on the cash basis, if the debt was in respect of a loan made in the course of the taxpayer's business as a banker or money-lender, or when the taxpayer was carrying on any other business the debt was in respect of that other business. Before the Tribunal the appellants claimed allowance for the debt written off relying upon both the branches of section 10(2)(xi) and by the application under section 66(1) of the Income-tax Act a question covering both the branches of the section was also sought to be raised. But the question on which the Tribunal was called upon to state the case was in form imprecise and in import somewhat vague. A bad and doubtful debt due to an assessee in respect of banking or money-lending business is allowable under section 10(2)(xi) if it is a debt written off as irrecoverable in respect of loans made in the ordinary course of such business. A bad and doubtful debt in respect of a business other than banking or money-lending is all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. The statement of the case does not analyse the evidence and throws no light upon the two branches of the argument raised before the Tribunal and which, in our view, arose out of the question on which they were required to submit a statement of the case. Counsel for the revenue, however, contended that there are three important circumstances which appear from the order of the Appellate Assistant Commissioner and the Income-tax Officer from which it may be inferred that the advances made by the appellants to the Bombay firm were not in respect of loans in the ordinary course of the business of the appellants, nor in respect of their other business. Counsel said that, (1) Sobhachand Amarchand, one of the partners of the Bombay firm, is the father of Seshmal, one of the partners of the appellants, and the minors, Ramniklal and Lakshmichand, who are admitted to the benefits of partnership ; (2) that large amounts of money were advanced shortly before the Bombay firm closed its business ; and (3) that there was a consistent practice for paying or receiving interest on the amounts due at the foot of the account, but no interest was charged by the appellant in respect of the dues at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by HEGDE J.--The appellant-firm (which will hereinafter be referred to as "the assessee") carried on business in drugs, chemicals, mercury, comphor and art silk yarn as also in money-lending, over a number of years. The accounting year with which we are concerned in this appeal is Samvat year 2008, commencing from October 31, 1951, and ending on October 18, 1952. The firm consisted of two partners, Mohanlal Bagmal and Seshmal Sobhachand. Two minors, Ramniklal Sobhachand and Lakshmichand Sobhachand, were admitted to the benefits of the partnership. The assessee had dealings for several years with a firm known as "Bhojaji Sobhachand" (to be hereinafter referred to as "the Bombay firm"). Sobhachand Amarchand, a partner of the Bombay firm, is the father of Seshmal, Ramniklal and Lakshmichand and he was having sixteen per cent. share in the Bombay firm. That firm became insolvent in April, 1952. The Bombay firm owed certain amount to the assessee. In the assessment of income-tax of the appellant for the assessment year 1952-53, relevant to the account year Samvat 2008, the assessee claimed a deduction of Rs. 2,68,385 as bad debt due from the Bombay firm, incurred by that firm in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it a supplementary statement of case on the reframed question. The Tribunal, accordingly, submitted a fresh statement of the case on the question referred. But, that statement merely catalogued the arguments advanced at the Bar. The Tribunal did not give any findings on the points arising for decision. Hence, by its order dated April 7, 1970, this court directed the Tribunal to submit a further statement. The Tribunal has accordingly submitted a further statement. The facts found by the Tribunal are found in paragraphs 11 and 12 of the statement. They read : " 11. We have taken into consideration the available materials and the rival submissions. The only facts in favour of the assessee are that incidental charges are debited to the Bombay firm in respect of some of the remittances and there is a flow of moneys to the Bombay firm up to March 10, 1952, when the last of the remittances was sent to it before the firm collapsed in about April, 1952. On the other hand, the narrations in the entries as they stand, the failure to adjust interest in the account of the Bombay firm at the stage at which it became a debtor in Samvat year 2007, the manner in which the partner of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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