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Sarangpur Cotton Manufacturing Co. ... vs Commissioner Of Income-Tax, Gujarat-I on 29 June, 1982
cites
Section 256 in The Income Tax Act, 1961 [Entire Act]
Section 36 in The Income Tax Act, 1961 [Entire Act]
Section 28 in The Income Tax Act, 1961 [Entire Act]
Section 155 in The Income Tax Act, 1961 [Entire Act]
Vithaldas H. Dhanjibhai Bardanwala vs Commissioner Of Income-Tax, Gujarat-V on 20 August, 1980
As discussed above, there was a credit balance of Rs. 33,028 in the Bad Debt Reserve Account at the end of the calendar year 1969, and it was, therefore, that the board of directors decided to credit Rs. 2,35,000 to this account to bring the total credit balance to Rs. 2,65,028. The debt of Rs. 2,37,537 due from the firm, that is, the debt in question and another bad debt of Rs. 23,381 were adjusted against the total credit balance of Rs. 2,68,028 in the Bad Debts Reserve Account. As a result of this adjustment, credit balance of Rs. 7,110 was left in the Bad Debt Reserve Account. As held by this court in Vithaldas H. Dhanjibhai Bardanwala v. CIT [1981] 130 ITR 95, if the debit entries posted by the assessee in his accounts indicate that the concerned debt is written off, the requisite statutory condition has got to be treated as fully complied with. Once the assessee has posted entries in the profit and loss account and corresponding entries are posted in the Bad Debt Reserve Account, that would be sufficient compliance with the provisions of the statutory requirement for writing off as irrecoverable the concerned debt in the books of the assessee. In the instant case, the assessee-company has posted entries in the profit and loss account and corresponding entries are posted in the Bad Debt Reserve Account. These entries coupled with deduction of Rs. 2,37,537 from advances in the balance-sheet of the assessee-company would be compliance with the condition with regard to writing off of the debt in question in its books of account for the relevant year of account.
Section 10 in Income Tax Rules, 1962 [Entire Act]
Jethabhai Hirji And Jethabhai Ramdas vs Commissioner Of Income-Tax, Bombay ... on 18 November, 1977
12. The above observations made by the Bombay High Court, though in connection with trading loss, would apply with equal force to a claim for deduction of bad debt. The Division Bench of the Bombay High Court was considering the point of time at which the amount is considered to be allowable as deduction to the assessee. It was in that context that the Division Bench dealt with the question of recoverability or irrecoverability of the amount. As observed by the Bombay High Court in Jethabhai Hirji and Jethabhai Ramdas case [1979] 120 ITR 792, what has been observed with regard to recoverability of the amount and the general principles to be applied to the question will apply irrespective of the nature of the claim of the assessee. As pointed out above, in the instant case, the assessee had written off the amount due from the firm. This, as observed in the case of Lord's Dairy Farm Ltd. [1955] 27 ITR 700 (Bom), furnishes prima facie evidence that the amount is irrecoverable. It was open to the Revenue to rebut the prima facie inference by drawing attention to the circumstances or by leading evidence to suggest that the position taken up by the assessee was incorrect. On the contrary, as we shall presently point out, there was sufficient material and evidence on the basis of which the assessee-company could have based its subjective satisfaction that the amount was irrecoverable when it wrote it off. The Tribunal, with respect, has not examined the assessee's claim in the light of the principles laid down by the Bombay High Court. The test which the Tribunal should have applied was whether there was sufficient material on record to show that on December 31, 1970, the decision taken by the assessee-company to write off the claim against the firm was or could be demonstrated to be improper or otherwise not bona fide. In our opinion, the Tribunal has failed to apply this test and ignored the relevant circumstances and consequently misdirected itself to reach the conclusion which it did.
Lord'S Dairy Farm Ltd. vs Commissioner Of Income-Tax, Bombay ... on 17 February, 1955
11. We would, however, like to refer to a decision of the Division Bench of the Bombay High Court in Lord's Dairy Farm Ltd. v. CIT [1955] 27 ITR 700, which is binding on us since it has been rendered prior to May 1, 1960 and wherein important observations are made with regard to the evidentiary value to be attached to the entries in the assessee's books of account writing off the debt or amount. In that case, the Division Bench of the Bombay High Court was considering the loss caused to the assessee by the defalcation of an employee. The amount was claimed as deduction under the provisions of s. 10(2)(xi) of the Indian I.T. Act, 1922. As regards the first head of the claim it was observed that it was difficult to understand as to how any amount was due by the employee to the assessee-company which amount became irrecoverable, and, therefore, the subject-matter of a deduction under section 10(2)(xi) of the 1922 Act. Even as regards section 10(2)(xv), the Division Bench was not inclined to agree with the view taken by the Tribunal but it observed that it did not follow that the assessee which suffered loss in its business could not get relief because the specific cases of deduction dealt with under s. 10 did not cover its case. According to the Division Bench, this was a trading loss which had to be deducted before arriving at the true profits of a business from a commercial point of view and the assessee would be entitled to deduct that loss although such a loss may not fall within the ambit of any of the deductions mentioned in sub-s. (2) of s. 10. The Bench was then required to consider the question as to when the amount of loss could be allowed to the assessee. It was observed that the material date was not the date on which the embezzlement took place but the date on which the loss is caused. According to the Bench, it is only when it is clear that the money cannot be recovered that the loss is caused. It is in this context of irrecoverability of the amount embezzled that the Division Bench went on to obeserve as follows (p. 708) :
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