Law: Income Tax Act, 1922

Section: 10(2)(xi)

Income-Tax Act (XI of 1922)---S. 10 (2) (xi) Bad debt Allowance for Applicant Bank paying cost and other: charges on account of goods imported by borrower in 1951 Borrower not paying amount due in spite of repeated demands¬--Goods sold in 1953 resulting in shortfall of Rs. 91,000 and such loss not made good by borrower Borrower instead filing suit claiming Rs. 58,000 from Bank for selling consignment below market price--Bank claiming Rs. 1,08,602 due from borrower as bad debt Held, result of borrower's suit would have no direct bearing for considering Bank's claim on account of bad debt. JUDGMENT AJMAL MIAN, J: In the above reference opinion of this Court is sought on the following question : "Whether in the facts and circumstances of the case the Tribunal was right in holding that a correct decision order the question whether the amount of Rs. 1,08,602 became bad in the year in question is possible only after final decision of the suit filed by the borrower?" 2. The relevant facts leading to the filing of the above reference are that the applicant Bank (hereinafter referred to as the Bank) maintained a Current Account of Messrs Pakistan Development Corporation Ltd. (hereinafter suffered to as the borrower). The borrower. opened a fetter of credit for 12196 18 in April, 1951 for import of safety matches from U. S. S. R. to East Pakistan. The documents for the imported goods were not returned by the borrows and the Bank had to pay cost of the goods and other charges. It seem that the above goods were cleared at Chittagong on 15 5 1951 through the Chartered Bank. ..The borrower did not pay the due amount in spite of the repeated demands. Consequently, the above goods were sold in July, 1953 for a sum of Rs. 5,35,225 which resulted in a shortfall of Rs. 91,000. The Bank required the borrower to make good of the above loss, but it was no done. On the contrary the borrower filed a suit claiming a sum of R3. 58, after adjusting the claim of the Bank. It further seems that on 7 12 1955, the Bank claimed from the borrower its aggregate dues amount to Rs. 1,08,602 which was followed by service of a legal notice upon the borrower, which was also not responded to. It…

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