TMI Blog1970 (11) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... r Agents Private Ltd. owed a large sum of money to the assessee. The assessee held shares worth Rs. 10,000 in Bihar Glass Factory, Colgong. The assessee's separated son was one of the directors of this company. At the instance of the aforesaid two companies the assessee debited a sum of Rs. 2,25,000 to the Bihar Glass Factory and gave credit for the same amounts to M/s. Bihar Agents Private Ltd. The assessee did not credit any interest in his account books to the account standing in the name of Bihar Glass Factory on the said loans due to him. During the relevant year of account, the assessee was able to recover a part of this sum of Rs. 2,25,000. Bihar Glass Factory failed to pay the balance, which resulted in the company going into voluntary liquidation on April 22, 1958. The outstanding amount of Rs. 1,10,054 was written off by the assessee in his books of account. The assessee claimed the said bad debt as deduction permissible under the Income-tax Act. The Income-tax Officer disallowed this amount holding, for the reasons given in his order, that the debt in question was not a trade debt or a loan in the course of the money-lending business. On appeal the order of the Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts Private Ltd. and the entire sum represented money-lending advances by the assessee to the debtor, (ii) that to the extent of Rs. 2,25,000 Bihar Agents Private Ltd. assigned the book debt valued at Rs. 2,25,000 (due from Bihar Glass Factory), and that the same was accepted by the assessee in part satisfaction of the moneys due from the debtor, and (iii) that, at the end of the year, the money-lending loan due from Bihar Agents Private Ltd. became reduced to Rs. 21,481." Appearing for the petitioner the first question that has been raised by Mr. Ugra Singh is that the supplementary statement of the case does not comply with the direction of this court inasmuch as the Tribunal has not stated whether the advances in question were in the ordinary course of money-lending business by the assessee to the Bihar Agents Private Ltd. Shri Lal Narain Sinha the learned Advocate-General who appeared for the assessee urged that, on a fair reading of the supplementary statement of the case along with the order of the Tribunal dated July, 24, 1963, it is clear that the Tribunal has come to the conclusion that the loan in question was advanced in the ordinary course of money-lending busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Tribunal found that no part of this amount was attributable to advances other than in the ordinary course of money-lending business. The contention of the petitioner, therefore, cannot, in my view, be accepted. The second point raised on behalf of the petitioner was that the assessee's failure to make any credit for the interest in his books in respect of the book debt of Rs. 2,25,000 taken over by him, leads to the conclusion that: (a) the system of accounting adopted by the assessee was not mercantile system of accounting; (b) the transaction in question was not in the ordinary course of money-lending business, but was with a view to, what the learned,counsel described, salvaging the Bihar Glass Factory in which the assessee has interest. Mr. Singh further contended that the assignment in question was not for business consideration. None of these contentions appear to have any force. The mere fact that interest on the book debt of Rs. 2,25,000 has not been credited after the assignment in question does not lead to the conclusion that the mercantile system of accounting was not adopted. It was rightly pointed out by the learned Advocate-General that a person giving up int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of fact as to what was the true nature of the transaction in question. As I have already indicated. the finding of the Tribunal is that the advances made were in the course of money-lending business. In that situation none of the cases cited above can be of any help to the petitioner. Shri Lal Narain Sinha, the learned Advocate-General, very rightly brought to our notice the decision of the Allahabad High Court in the case of Bareilly Corporation Bank Ltd. v. Commissioner of Income-tax. This case, although not identical to the facts in the present case, nevertheless is helpful in coming to the conclusion that, on the findings arrived at by the Tribunal, the amount of Rs. 1,06,834 has been rightly allowed as bad debt under section 10(2)(xi) of the Act. The head-note of the case, which is being quoted, brings out the facts and the decision very clearly. It is as follows : "The assessee, a banking company, had advanced a loan to an ice factory. The loan kept on mounting up and the ice factory transferred its interest in the shares and assets including lands and buildings of a match factory in discharge of the loan. The assessee subsequently sold this property in bits and re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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