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TMI Blog1991 (5) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the month of June, 1975. Consequently, said Mangaram was known to assessee firm. On the second occasion in the month of June, 1975 said Mangaram came to the business premises of the assessee and represented to the assessee firm that his brother Chaudhary Chelaram had sent 101 bags of 'Jira' to be sold to the assessee. The said Mangaram produced a railway receipt in respect of 101 bags of 'Jira' and handed over to the assessee after making endorsement in favour of assessee. The said 'Jira' was to be sold on commission basis by the assessee after the same was received from railway. Said Mangaram demanded advance of Rs. 20,000 towards part payment of said 'Jira' on the ground that he needed said amount to purchase a tractor. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... layed in writing off of said debt in S.Y. 2033. In the alternative, the ITO held that the assessee had found that Mangaram had no assets when the assessee came to know about the cheating and as such the debt had become bad in yet earlier year. Consequently, the ITO rejected the plea of the assessee about deduction of the said amount in computing the profits and gains of the business. 3. The assessee filed appeal before the CIT(A). The CIT(A) held that the assessee was not a money lender and that making advance was not the business of the assessee. Consequently. the debt in question could not be said to be a trading debt and hence provisions of s.36(2) were not attracted. The CIT(A) then considered the question whether the amount represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al prosecution and that on the facts of the case the loss in question should be regarded to have occurred in S.Y. 2033 and as such deduction was allowable for asst. yr. 1978-79. The submission on behalf of the Department, on the other hand, was that as soon as cheating become known to assessee, the assessee would have known that the debt in question had become irrecoverable and as such the loss should be regarded to have occurred when the factum of cheating had become known. In any case, the loss should be regarded to have become known to the assessee when the judgment of the Asstt. Sessions Judge was delivered on 12th Oct., 1976 in S.Y. 2032. Consequently, the loss in question could not be said to have occurred in accounting year relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wards price of Jira which would be realised on sale in the market after the same was received from railway. Consequently, the transaction in question was a business transaction between the assessee and said Mangaram, acting on behalf of his brother Chelaram and as such the loss which occurred in said transaction was a trading loss. 7. The real dispute between the parties as to in which year the said trading loss occurred. The case of the Department is that the trading(loss) occurred when the fact of cheating became known to the assessee in July, 1975 which fell in S.Y. 2031. The alternate case of Department is that the trading loss occurred on 12th Oct., 1976 when the judgment of the Asstt. Sessions Judge convicting Mangaram was rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee entertained reasonable belief that amount would not be recovered. This event occurred in S.Y. 2033 relevant for asst. yr. 1978-79. Consequently, the assessee wrote off the amount in this year. On the facts of this case, the loss must be regarded to have occurred in S.Y. 2033 relevant to asst. yr. 1978-79 and the assessee was justified in claiming deduction of said amount in this year. 8. The question as to in which year the business loss had occurred is a question of fact depending on all the surrounding circumstances. No hard and fast rules can be laid down in this regard. Peculiar facts of each case have to be examined closely in order to arrive at a particular conclusion. In the case of Associated Banking Corporation of India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbezzlement but of cheating. The same principle would, however, apply. The date on which the assessee came to know of cheating would not necessarily be the date on which the loss can be regarded to have occurred. Everything would depend upon facts of the case. In the present case the assessee filed complaint to the police and on the complaint of the assessee Mangaram was prosecuted. When criminal prosecution was pending, the assessee on the facts of the present case could have entertained reasonable belief that amount could be realised under pressure of criminal case. Consequently, the assessee was justified in waiting till the result of prosecution became known to the assessee. On the facts of the present case, the loss would be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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