Devi Films Ltd. vs Commissioner Of Income-Tax, Madras. on 11 March, 1963
18. The case, Devi Films Ltd. v. Commissioner of Income-tax, itself makes this clear. In that case the assessee had entered into an agreement with one Tehrani, who was producing a cinema film, whereby, first, a sum of Rs. 3,80,000 had been advanced by the assessee to Tehrani and later by a separate agreement on 31st January, 1956, a sum of Rs. 1,50,000. In all, the assessee had advanced to Tehrani a sum of Rs. 5,57,022-10-1 in pursuance of the two agreement. The picture, however, did not prove a business success, but the assessee had realised out of the amounts advanced by him from the collections from the exhibition of the picture a sum of Rs. 4,91,071-1-3. Thus there remained a balance of Rs. 65,950-13-10 due and payable by Tehrani to the assessee. A fresh arrangement was entered into with the assessee on 1st April, 1957, in regard to this indebtedness. Tehrani was not a well-to-do person. He had a house in Madras and held 100 shares in a certain studio of the face value of Rs. 10,000. By the agreement of 1st April, 1957, it was agreed between the assessee and Tehrani that the latter should pledge his shares in the studio as security for Rs. 10,000 on condition of the assessee having the balance of Rs. 55,950-13-10 due from Tehrani to him. The assessee claimed the amounts thus waived as a bad debt.