TMI Blog1978 (7) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... irm as a going concern with all assets and liabilities. The thirteen erstwhile partners became shareholders of this newly floated private limited company. For the assessment years 1968-69, 1969-70 and 1970-71, the company claimed deduction of Rs. 2,15,741, Rs. 6,539 and Rs. 1,02,058 on account of bad debts. There is no dispute that the transactions in which these amounts became bad debt related to export of coal to Pakistan and they were all taken into account in computing the income of the partnership firm in previous years. The ITO disallowed the claims in toto. This disallowance was confirmed by the AAC as well as by the Tribunal. At the instance of the assessee, the Tribunal has referred the following questions of law for our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee's alternative claim under s. 28 was repelled on the ground that it did not arise out of the business of the assessee-company but out of the business of the predecessor partnership firm. Section 36(2)(i) relates to deduction of bad debts. In this it corresponds to s. 10(2)(xi) of the 1922 Act. The Act of 1922 also contemplated allowance of such amount as bad debt as the ITO may estimate to be irrecoverable and which had already been written off in the assessee's account in respect of any part of the business, profession or vocation. Construing this provision it was held by the Supreme Court in (1) CIT v. Sankara Ayyar [1951] 20 ITR 597 and CIT v. Pandit Lakshmi Kant Jha [1972] 84 ITR 481 and by several High Courts in (2) CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the debt having become bad should be denied only because the assessee's identity has changed, though the identity of the business continues. Section 28, read with s. 36, provides for computation of the income of, inter alia, business. In order to recover tax the income is assessed in the hands of an assessable entity. But the burden of s. 28 as well as s. 36 is to compute the assessable business income. Section 28 expressly applies to a business being carried on in the previous year. We find support for this view in a decision of the Andhra Pradesh High Court in CIT v. T. Veerabhadra Rao, K. Koteswara Rao Co. [1976] 102 ITR 604. It was emphasised by their Lordships that there was nothing in the provisions of the Act to indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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