Law:

Section:

Section 28(i) of the income-tax act, 1961-Business deduction/loss-Assessee-company suffered irrecoverable loss through embezzlement by an employee-it wrote off bulk of loss as bad debt and was eventually allowed deduction in respect thereof-it wrote off and claimed deduction in respect of balance amount in assessment year 1969-70 which was disallowed by no-Tribunal found that assessee had genuine hope of recovering said balance amount till relevant previous year but lost that hope in that year-whether impugned balance amount constituted business loss in said assessment year-held, on facts, yes Facts On account of certain embezzlement of funds by an employee, who was later declared an insolvent, the assessee-company suffered an irrecoverable loss of Rs. 9,89,112. It ultimately wrote off a sum of Rs. 9 lakhs during the assessment year 1958-59, and the balance of Rs. 89,112 in the assessment year 1969-70, and claimed deductions of the amounts in the respective years as bad debts. The assessee's claim for the deduction of Rs. 9 lakhs in the assessment year 1958-59, had been rejected by the revenue authorities, but finally, by a decision of this Court, the company was held entitled to the deduction of the loss caused to it. In the instant case relating to the assessment year 1969-70, the revenue authorities again rejected the assessee's claim. The Tribunal, however, held that except for an honest and bona fide belief that there was a chance of recovering the balance amount of Rs. 89,112, there was no conceivable reason why the assessee should have written off and claimed the loss of Rs. 9 lakhs in the assessment year 1958-59 and that of the balance of Rs. 89,112 in the assessment year 1969-70. In this view of the matter, the loss of Rs. 89,112 was allowed as deduction by the Tribunal. On reference : Held The Tribunal had found it as a fact that the assessee-company genuinely entertained a hope of recovering the aforesaid amount till the relevant previous year and it was only in the relevant previous year that it lost its hope of recovering that amount. In view of this and having regard to the decision of this Court in Sassoon J. David & Co. (P.) Ltd. v. CIT…

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