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TMI Blog1977 (5) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.82 The ITO found that out of the above three items, the first, item of debt amounting to Rs. 17,466 (£. 942 s. 18 d. 4) had already been realised by the assessee during the year and hence, in effect, the balance sum of Rs. 35,208 was considered by him. The facts relating to the shipment of the remaining two items as per assessee's written reply filed before the AAC on 16th Sept., 1975 are as under: "Export sales to Nigeria were done to a local party through out Agent situated and resident of Nigeria. Goods were despatched on 9th March, 1971 vide B/L No. 23. The goods were billed C.I.F. The party to whom goods were sent to take delivery and pick the goods. The goods were sent through our foreign agent against bill at sight. The assessee wrote to the agent to arrange for the delivery of the goods and in reply the agent wrote back that if he did not retire the documents, then the assessee should draw bill on agent and present to him. The assessee changed the documents and new documents were drawn on foreign agent and to him accordingly. In this, lot of time got wasted. In the meantime, foreign agent instructed Nigerian Bank to get the goods stored in their godowns after getting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s above mentioned." The ITO disallowed the assessee's claim on the following grounds: "(i) The assessee despatched the goods against the instructions of the Sate Trading Corporation. (ii) The Lloyds Agency, Nigeria lodged the claim to the Insurance Company for recovery of amount after a lapse of one and a half year. The claim thus became time bared by their negligence. (iii) The assessee did not take any legal steps for enforcement of claim". It may be mentioned here that while allowing deduction of Rs. 17,466 to the assessee, the ITO observed as under: "Add bad debts received………Rs. 17,466/-". The assessee went in appeal before the AAC and pleaded that the amounts in question should have been allowed as bad debts. The AAC did not accept the assessee's contention on the ground that since the property in the goods did not pass on to the foreign parties concerned, the question of those parties being debtors of the assessee did not arise and hence in the absence of a debt, the question of a bad debt did not survive. Before the AAC, the assessee took an alternative plea that if the amount is not allowed as a bad debt, it should be allowed as a trading loss. This plea of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee of earlier previous year and hence during the relevant accounting period, when the assessee could not realise the outstanding amount, it should have been allowed as a debt. It was argued that in spite of the assessee's best efforts, it could not realise a single payment out of the outstanding amount and it was futile and expensive also to file suits for recovery which could only be filed in the foreign Courts and in these circumstances, as a prudent business man, the assessee had no alternative but to write off the amount in the books of accounts of the relevant accounting period. It was also contended that even assuming that the amount in question is not treated as a bad debt, what the assessee lost was his stock-in-treated and hence it should have been allowed as a deduction against the profits of the relevant assessment year. 4. The learned Representative of the Department has supported the order of the AAC and has submitted that as the foreign buyers did accept the delivery of the goods, the title in the property did not pass on to the purchases and in these circumstances, the question of allowing the amounts as a bad debt, did not arise. It was also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be said that these transactions had already been not in the nature of normal trading transactions of the assessee. In this connection, we place reliance on the decision of the Madras High Court in the case of C.T. Narayanan Chettiar vs. CIT Madras 60 ITR 690 (Mad). In the above decision, their Lordships have placed reliance on the observation of the Patna High Court in the case of Deonati Prasad Singh vs. CIT 15 ITR 165 (Pat) to the following effect: "The IT Department for a number of years in the past have treated these investments to use an expression which has been adopted by the ITO in various years referred to above—as being part of the money lending business of this particular assessee; the assessee was taxed on a portion of the interest which he showed as having accrued as much as Rs. 10,000 was added on to the assessable income under this head. It may be stated this was as a result of a losses in deal or an inaccurate appreciation of the legal position, but this defect was common both to the assessee and to the IT Department. The Department cannot be allowed to blow hot and cold at the same time. They cannot be allowed to treat the investments as a part of money len ..... X X X X Extracts X X X X X X X X Extracts X X X X
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