Law:

Section:

Section 36(1)(vii) of the Income-tax act, 1961-Bad debt-Assessee, in the course of money-lending business, credited, on request by concerned customers, one h with an amount by debiting the same to account of F-Subsequently, F having gone into liquidation, said amount debited by transfer entry was written off as bad debt and assessee claimed deduction there for-ITO and AAC disputed legal validity of aforesaid transfer-Tribunal found that impugned transfer entry was not impeached when it was first made and interest from f on debited amount was assessed in assessee's hands in earlier years and, therefore, allowed impugned amoumt as bad debt-Whether tribunal justified-Held, on facts, yes Facts The assessee-company carried on diverse business activities including that of money-lending. Two of the assessee's customers were FP Ltd. and HF Ltd. FP Ltd. owed a certain sum to HF Ltd. Both FP Ltd. and HF Ltd. approached the assessee together and requested it to credit the amount FP Ltd. owed to HF Ltd., to the latter's account and debit the account of FP Ltd. with the assessee correspondingly. This transaction by book entries was effected in 1951. During the assessment year 1957-58, the assessee-company showed a heavy net loss which included a sum in the account of FP Ltd. written off as bad debt since FP Ltd. had gone into liquidation. The ITO held that impugned bad debt was in fact capital loss in the case of HF Ltd., and by the aforesaid tripartite arrangement between FP Ltd., HF Ltd. and the assessee, the said capital loss was sought to be converted into trading loss of the assessee by transferring it to its account. Therefore, the ITO disallowed the claim of the assessee to treat the impugned amount as bad debt. The AAC, on appeal, concurred with the ITO. On further appeal, the Tribunal found that the amount had been lent by way of transfer entries as far back as 1951, when the transfer had not been impeached. Subsequently, the interest on the debit balance in the accounts of FP Ltd. had been charged and assessed, and, therefore, it was too late for the department to go back on its own findings and dispute the legal validity of the transfer. The Tribunal,…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492