TMI Blog1969 (3) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ble expenditure. The assessee advanced amounts to Jayanthi Films, Madurai Private Ltd., which was a private limited company and which consisted of two shareholders, namely, the assessee and his wife, the former being its managing director. The assessee was submitting returns as the karta of an Hindu undivided family. During the previous year ending March 31, 1962, relevant for the assessment year 1962-63, the assessee was running a business under the name and style of " Rajaram Talkies " which he took on lease. The assessee handed over charge of the theatre during the currency of the previous year to its owners. The advances made by the assessee were entered in the books of account maintained for the theatre business. As on December 31, 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at such interest received by the assessee in the past was made exigible to tax under the head " other sources ". The Income-tax Officer was of the view that the deduction of Rs. 16,746 was not admissible. The Appellate Assistant Commissioner, on appeal, sustained the assessment. On a further appeal to the Appellate Tribunal, it negatived the assessee's contentions and did not agree that the waiver effected by the assessee resulting in his forgoing a part of the interest does not tantamount to the forgoing of a trade debt and, in any event, it could not be said that that part of the debt waived had become a bad debt. It also found as a fact that there was no commercial expediency for the assessee giving up the portion of the debt, even if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntages to itself under the guise and in exercise of the powers of the indoor management of the company. The credit in the books of account has a significance of its own. It is not stated or urged that the accounts were kept in a mercantile system. On the other hand, it appears to be on accrual basis and the assessee has treated such an income as having been accrued to him as karta of the Hindu undivided family. The question to be posed is whether the resolution of the board of directors of the company is enforceable in the eye of law and whether the assessee is bound by it. The resolution does not even state that the company is incurring a loss. It is said that the rate of interest charged by other creditors was less and " the company's res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential detail is singularly absent in this case. This interest income to which the assessee is entitled is only to be treated as quid pro quo for advances of large sums of money lent by him to the company and in the course of such money-lending the amount was earned by him and is shown and reckoned in the books of account as having accrued. In such a context the assessee cannot, by himself and without necessity therefor, waive a portion of the same and on the basis of such waiver claim fiscal benefits. In the instant case, the interest income having been rightly assessed under the head " other sources ", the claim of the assessee that it was a debt payable to him by the company is absolutely without any basis whatsoever. The receipt in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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