Law:

Section:

Section 36(1)(vii), read with section 256 of the Income-tax Act, 1961 [Corresponding to section 10(2)(xi), read with section 66 of the Indian Income-tax Act, 1922] - Bad debts - Assessment year 1948-49 - Whether question whether debt is bad or question in what year it became a bad debt are questions of fact and findings of Tribunal on these questions can be disturbed by High Court only if there is no evidence to support them or if Tribunal has misdirected itself in law - Held, yes - Assessee was a distributor and exhibitor of films and financed film producers against arrangement for distribution right for certain defined territories - Assessee claimed two sums as bad debts on ground that these sums could not be recovered out of advances made to film producers which was disallowed by ITO - AAC allowed part of claim holding that entire amount advanced by assessee to producers was either to be recouped by him from their share of realisations or in case such share was deficient balance was returnable after a specified period and in both cases assessee was only entitled to a particular percentage of commission out of gross realisations and advances were mere loans to help principal to meet their cost - Tribunal allowed assessee's claim holding that amounts in question had become irrecoverable in relevant year of account - Whether debts which were due to assessee were debts of trade profits of which were being computed and, hence, no question of law arose from order of Tribunal - Held, yes FACTS The assessee was a distributor and exhibitor of films and financed film producers against arrangement for distribution rights for certain defined territories. On 25-9-1945 the assessee entered into an agreement with E with the object of acquiring distribution rights of a picture in terms and conditions stipulated in the agreement. According to this agreement the said picture was to be distributed and exhibited for a period of five years from the date of delivery or first release' and in consideration of this arrangement the assessee a greed to pay a certain amount by way of advance in four instalments. The picture was released to the assessee in June, 1946, but it proved to…

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