TMI Blog1998 (11) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... t of irrecoverable rent from M/s Dadaji Dhagji Co. and M/s De Smet India (P) Ltd. both in respect of earlier years as well as the years under reference under S. 24(1)(x) of the IT Act, 1961 r/w r. 4 of the IT Rules, 1962 ?" 2. As the question suggests, it relates to claim of the assessee to deduct arrears in respect of amount received by it from the two occupiers of its properties, namely, M/s Dadaji Dhagji Co. and M/s De Smet India (P) Ltd. relating to earlier period of these assessment years. 3. At the outset it has been stated by the learned counsel for the assessee Mr. J.P. Shah that, as the amount claimed as irrecoverable has, in fact, been received by the assessee in the later years, he does not press for his claim to deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n taken by the assessee to compel him to vacate the property and the assessee must either have taker, all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfy the AO that legal proceedings would be useless, apart from other conditions with which we are not presently concerned. The facts about these conditions as noticed by the Tribunal in its order concerning M/s De Smet India (P) Ltd. are that notice in the first instance was given to revoke the licence for terminating the tenancy on 7th March, 1972, and demand for arrears of rent/compensation for use under occupation of the house was made along with the demand to vacate the premises. Final notice in that respect was given on 28th March, 1973. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the assessee did take a stand that if any legal proceedings are instituted against the party the same would be useful. The moment the suit for recovery of the arrears of rent and for the possession of the property has been filed, the assessee presupposes that the arrears of rent is realisable from the said party. So there is nothing on the record to establish that the arrears of rent due from the said party is lost or could not be realised or become irrecoverable at the time the legal proceedings were started by him." On these reasoning, the claim of the assessee was disallowed. 6. A mere perusal of the reasoning adopted by the Tribunal goes to show that it works at cross purposes with the rule itself. Recalling the two condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction on account of bad debt or unrealisable rent, an assessee prefers to have recourse to legal remedy, he is not rendered in worse situation. As a matter of fact, by taking recourse to legal proceedings, the assessee is relieved primarily to prove that the debt is not recoverable in ordinary way. The Tribunal has approached the issue as if either legal proceedings must have been terminated against assessee to prove the irrecoverability of rent or he should prove the irrecoverability of such a nature, has to establish that filing of legal proceedings is a futile exercise. If the Tribunal's plea were to be accepted, the first part of the rule requiring that the assessee must take necessary steps to institute legal proceedings for recovery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce period in succeeding year may fulfil the condition under r. 4 in the previous year relevant to assessment year in question in which notice has been given notwithstanding suit has been instituted after the end of previous year. It was be noticed that the question has to be determined not as if the rent has in fact become unrealisable and irrecoverable finally but it is founded on reasonable estimation of assessee about the possibility of its non-realisation in spite of making all efforts to recover it. The emphasis is that before laying claim the assessee must make reasonable efforts to recover it and he must establish of having made such effort and failure of such effort in yielding results until the claim is made should lead to reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rent are not being paid despite demand and he has been compelled to file suit for recovery of rent and eviction. He also established that even after filing of suit, the occupant has not paid the rent as claimed but raised dispute by filing a suit for determining standard rent, requiring reduction in payment of rent, which manifested clear intention of occupant not to pay the agreed rent on the basis of which annual letting value has been determined and income from house property is computed. Thus, assessee has done what all it could do to take step to institute legal proceedings. He thereafter is not required to await until such litigation turns out to be an unfruitful exercise as envisaged by the Tribunal before claiming deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
