Law:

Section:

Section 28(i) of the Income-tax Act, 1961 (Corresponding to section 10(1) of the Indian Income-tax Act, 1922) - Business loss/deduction - Year in which deductible - Assessment year 1956-57 - Assessee claimed to have advanced various amounts to sub-contractor - According to assessee project sub-contracted was not completed in time by sub-contractor and it could receive only part of amount from contractee - It claimed difference between two amount as business loss - Assessee did not maintain regular accounts - Plaint in suit filed by assessee to recover amount from sub-contractor revealed that advances had been made by assessee from earlier years - Whether alleged irrecoverable amount not being identifiably made during previous year relevant to assessment year it could not be said that loss was relatable to year in question and, therefore, had to be disallowed as business loss - Held, yes FACTS During the accounting year ending on 31-3-1956, the assessee carried out certain works directly and certain other works through three sub-contractors to issue in question related 16 items of work which were carried out by the assessee through one of such sub-contractors, namely, G and those works related to the Government of India Printing Press at Nasik. As per its usual terms with such sub-contractors the assessee was to retain only 5 per cent of the gross receipts from the Government in respect of the contract as its profits. Since the sub-contractor, G was in need of monies, the assessee, it was claimed, went on making advances to accommodate him on his request. Out of 16 items of jobs which were subject to the sub-contractor with the permission of Government, about 14 items of jobs were completed by him but the sub-contractor left two major works incomplete, which ultimately led to cancellation of the contract of the assessee by the Government of India. The assessee was to recover the advances which he used to make to the sub-contractor from the bills recovered from the Government of India in respect of such sub-contracts to be executed by that sub-contractor. According to the assessee, during the accounting year the an amount was advanced to G and an amount was…

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