Law:

Section:

Section 36(2) of the Income-tax Act, 1961 Bad debt - Assessment year 1965-66 - ITO and appellate authority disallowed claim for bad debt for Rs. 18,086 since assessee subsequently recovered from insurance company Rs. 10,000, out of this debt - Assessee initially made no claim for bad debt before lower authorities or tribunal for assessment year 1966-67 Assessee subsequently claimed before tribunal deduction of balance bad debt of Rs. 8,086 - tribunal admitted additional ground and allowed assessee's claim Whether justified - Held, on facts, yes Facts For the assessment year 1965-66, the assessee, a banking company, wrote off a sum of Rs. 18,086 as bad debt and claimed the same as an allowable deduction. The ITO disallowed the claim on the ground that the assessee had claimed a part amount from the insurance company for theft of its goods and that it had, in fact, obtained insurance proceeds of Rs. 10,000 in the subsequent assessment year 1966-67. Both the AAC and the Tribunal sustained the ITO's order but the Tribunal, however, observed that the assessee would be at liberty to claim the debt in the subsequent year, if the lower authorities found the facts stated to be correct. In the assessment year 1966-67, the assessee neither claimed bad debt before the ITO or the AAC, nor before the Tribunal in its memorandum of appeal. However, on 19-06-1974 (by which time the appeal for the assessment year 1965-66 had been disposed of), the assessee raised before the Tribunal an additional ground that the balance amount of Rs. 8,086 should be allowed as a deduction. The Tribunal overruled the revenue's objection for admitting this additional ground, observing that the assessee's claim for bad debt was disallowed in the assessment year 1965-66 only because it had realised Rs. 10,000 out of Rs. 18,086 in the assessment year 1966-67. It, accordingly, held that the balance of Rs. 8,086 had become bad debt during the previous year relating to the assessment year 1966-67 and allowed the assessee's claim. On reference, the revenue contended (i) that the Tribunal was not justified in admitting the additional ground; and (ii)that the Tribunal could not give any binding direction…

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