Law:

Section:

Section 36(1)(vii) of the Income-tax Act, 1961 (Corresponding to section 10(2)(xi) of the Indian Income-tax Act, 1922) - Bad debts - Assessment year 1946-47 - Whether unless a claim made by assessee is final, there is no point in asking in what circumstances assessee can make a claim - Held, yes - Whether phrase 'as ITO may estimate to be irrecoverable' in section 10(2)(xi) of 1922 Act governs not only sum referred to in phrase immediately preceeding, namely, 'loans made in ordinary course of such business', but also sum referred to in earlier phrase, namely, 'bad and doubtful debts, due to assessee' - Held, yes - Whether estimation of doubtful debts to be bad is not impossible notion and if bad debts could be held to be irrecoverable, wholly or in part, and doubtful debts could be held to be bad, doubtful debts can be held to be irrecoverable, if circumstances justify that conclusion - Held, yes - Whether if phrase 'as ITO may estimate to be irrecoverable' applies to both parts of clause (xi) of section 10(2) of 1922 Act and if a claim of deduction made in respect of either a debt or a loan can be allowed only if and to extent ITO estimates it to be irrecoverable, it becomes wholly immaterial to enquire for practical purposes of taxation on what basis assessee may himself make a claim - Held, yes Words and Phrase: Phrase 'as ITO may estimate to be irrecoverable' as occurring in section 10(2)(xi) of the Indian Income-tax Act, 1922 FACTS Between July and December, 1941, one 'C' drew on the Hongkong office of the assessee banking corporation various export bills covering gunny bags, jute, wine and textiles, exported by them. Such bills were negotiated by the Calcutta and Bombay branches of the assessee with whom 'C' had opened a letter of credit. Some collections were made by the assessees in respect of those bills, but it appeared that at the time when the Japanese came to occupy Hongkong, there was an amount still outstanding. After the Japanese occupation of Hongkong had ceased and Allies had resumed possession of the place, the assessees enquired from their Hongkong office on 12-11-1945, whether there was any possibility of the debt being realised. On…

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