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Jethabhai Hirji And Jethabhai Ramdas vs Commissioner Of Income-Tax, Bombay ... on 18 November, 1977
cites
Section 66 in Income Tax Rules, 1962 [Entire Act]
Kothari And Sons vs Commissioner Of Income-Tax, Madras. on 25 March, 1965
11. The next authority relied upon by Mr. Dastur was a decision of the Madras High Court in Kothari and Sons v. CIT [1966] 61 ITR 23. This was also a case of embezzlement. There were certain manipulations in the cash and the share transfer stamps accounts by the employees, which had being going on for several years but had been discovered only in the accounting year. The ITO held initially that since the embezzlement was discovered in 1954, it could not be allowed in the assessment year 1954-55. When the assessee claimed the deduction in the next assessment year 1955-56, the ITO rejected the claim taking the view that the loss did not occur in the course of the business, and that, further, as the assessee had taken promissory notes from the employees responsible for the embezzlement, but had taken no action to recover the moneys on the promissory notes, no allowance could be granted. The Division Bench observed that the fact that the employees had executed promissory notes or that the employer had not pursued further remedies against these employees on the negotiable instruments would not by themselves disentitle the employer from claiming the deductions. According to the Bench, it was not incumbent upon the employer to pursue a useless remedy and waste money in such proceedings. According to Mr. Dastur's submission, the assessee before us who had filed a suit much prior to the writ-off (though in the very calendar year) could not be put in a position worse than he would be put if he had not taken any remedy against New Era. According to him, if the suit had not been filed then on the material on record the assessee would have been entitled to the deduction and the position could not be made worse for the assessee merely by reason of the fact that the suit was proceeded with, decree obtained, and notices for winding up given or sought to be given, but which ultimately yielded not a single paisa to the assessee in respect of the amount of his claim.
U. P. Vanaspati Agency vs Commissioner Of Income-Tax. on 1 March, 1967
12. Mr. Dastur also referred to U.P. Vanaspati Agency v. CIT [1968] 68 ITR 120, where the Allahabad High Court came to the conclusion that a loss which had occurred in the assessment year 1960-61 could be claimed and allowed in the assessment year 1961-62, provided all other requirements were satisfied. This was, it may be noted, also a case of embezzlement by an employee. One of the grounds on which the Tribunal had decided against the assessee was that the loss had occurred in the year 1960-61 and not 1961-62, in which the claim for deduction was made. The Division Bench observed that it was on January 4, 1960, that a sum of Rs. 13,100 was stolen, but on the very same day Rs. 1,100 were recovered. The assessee allowed some time to expire and made the claim only in the assessment year 1961-62, which commenced on April 1, 1960, that is to say, about three months after it was dispossessed of the amount of Rs. 1,200. It was observed that this was not an unreasonably long period for any person to entertain a hope of recovery of the amount of which he was dispossessed. This may also be regarded as a reasonable period within which efforts could be made by a person to have his money back. According to Mr. Dastur, the account of New Era would show that the last of the payments made by the party was, as already stated earlier, on October 22, 1955. The assessee thereafter has waited for two years and written off the amount on the last date of the calendar year 1957. According to him, on these dates, to regard the write-off premature, would be something improper and unreasonable.
Devi Films Private Ltd. vs Commissioner Of Income-Tax on 21 April, 1969
13. The next authority to which our attention was drawn by counsel for the assessee was of the Madras High Court which was expressly considering the case of a bad and doubtful debt and the point of time when such debt could be regarded as being irrecoverable. The decision cited was Devi Films Ltd. v. CIT [1963] 49 ITR 874 (Mad). Pursuant to an agreement dated July 6, 1955, and a further agreement dated January 31, 1956, the assessee had advanced to one Tehrani a sum of Rs. 5,57,022-10-1. The assessee was able to realise a sum of about Rs. 4,91,000 leaving a balance of about Rs. 65,950 due and payable by Tehrani to the assessee. It was observed that this Tehrani was not a person of large means. On April 1, 1957, the assessee entered into an arrangement with Tehrani by which certain shares were pledged as security for a sum of Rs. 10,000 on condition of the assessee waiving the balance of Rs. 55,950, In the year of assessment 1957-58, in respect of the previous year which ended on April 12, 1957, the assessee wrote off the sum of Rs. 55,950-13-10 (the amount to be waived under the arrangement of April 1, 1957). It was found amongst other things by the Tribunal that within six months after the date of writ-off, which was April 12, 1957, the assessee had made a further advance of Rs. 25,000 to Tehrani. The Tribunal also found that the debtor owned houses at Madras and in Ootacamund and that though the house in Madras stood in the name of the debtor's wife, the debtor himself had treated the income from this house as his own income in submitting his income-tax returns. It was because of these facts that the claim to write off the amount as a bad debt was disallowed, but the observations made in connection with the proper approach to the question and the principles enunciated were very strongly relied on by Mr. Dastur and they may be usefully reproduced. It is observed at page 877 of the report as follows :
Sidhramappa Andannappa Manvi vs Commissioner Of Income-Tax, Bombay on 28 August, 1951
In our opinion, this authority does not lay down any new principle, but merely reaffirms the principles earlier laid down in Sidhramappa's case [1952] 21 ITR 333 (Bom).
Kantilal Chimanlal Shah vs Commissioner Of Income Tax, Bombay ... on 26 March, 1954
16. Mr. Joshi also relied on Kantilal Chimanlal Shah v. CIT [1954] 26 ITR 303 (Bom), where the principles and tests enunciated in Sidhramappa's case [1952] 21 ITR 333 (Bom) were applied also by a Bench of the Bombay High Court. It was observed that the approach must be from the point of view of the possibility of the realisation of the debt and that it was not open to the creditor merely by making an entry to convert a debt which might be a good debt into a bad debt.
Ts. Pl. Chidambaram Chettiar And Ors. vs Commissioner Of Income-Tax on 6 January, 1966
17. Mr. Joshi also strongly relied upon the decision of the Madras High Court in T.S.PL.P. Chidambaram Chettiar v. CIT [1967] 64 ITR 181. In the above decision the High Court was considering the disallowance by the Tribunal of two sums claimed by the assessee as bad debts in the assessment year 1956-57. The finding of the Tribunal was that the assessee should have written off the debt prior to the accounting year. In connection with this aspect of the matter, it was observed on page 187 :
K.P.G.B.U.G.M.S.S.A. Mohamad Abdul ... vs The Commissioner Of Income-Tax on 23 August, 1948
18. Mr. Joshi next referred to the decision given by the Full Bench of the Lahore High Court in B.C.G.A. (Punjab) Ltd. v. CIT [1937] 5 ITR 279 [FB]. The relevant observations of the Full Bench are in connection with questions No. 4 and 5 dealt with at pages 304 to 307 of the report. It was observed, and rightly so, that in every case it was a question of fact to be determined for consideration of all relevant circumstances.
Jadhavji Narsidas And Co. vs The Commissioner Of Income-Tax, Bombay ... on 23 October, 1958
19. Mr. Joshi submitted that the observations in Jadavji's case [1963] 47 ITR 411 (Bom) were directly on all fours with the facts being considered by us and the fact that the assessee proceeded with the suit would clearly establish that he had not given up hopes about recovering the amounts due from the debtors and had not really come to the conclusion that the debtors would not be paying him his dues. It was further submitted that if this could be held as having been established, the write-off on December 31, 1957, would have to be held as unjustified and improper, and that in any case there was material on record for the Tribunal to come to the conclusion which it did, which conclusion ought not to be disturbed.