Law: Income Tax Act, 1922

Section: 4(3)(vi),10(2)(xi),10(2)(xvi)

Income-tax Act, 1922 -Sections 4(3)(vi), 10(2)(xi), 10(2)(xvi) ----Bad debt -Company taking over the predecessor's proprietory concern as integral whole, with all assets and liabilities -No discontinuance of proprietory concern -Trade debts of predecessor whether trade debts of company -Held yes -Whether company entitled to allowance in respect of such debts becoming irrecoverable -Held yes -- Business expenditure -Car allowance -Company -Payment of car allowance to managing director -Prior sanction of Board of Directors not obtained -Payment approved by members of company on director's recommendation -Factum of payment not doubted -Whether allowance admissible -Held yes -- Business expenditure -Car allowance paid to Managing Director -Payment duly recommended by Directors and approved by members of Company -Deduction admissible -- Bad debt -Assets and liabilities of proprietary concern taken over by Limited Company -No discontinuance of business or loss of identity or integrity -Trading debt of proprietary business admissible in Company's hand -- Corresponding Sections: Income-tax Ordinance, 1979 -Sections 23(1)(x), 23(1)(xvii) -- ORDER {The order was passed by A. AHMAD, Accountant Member}.---The two appeals are directed against orders of the Appellate Assistant Commissioner and concern the charge years 1960-61 and 1961-62. The appellant company derived income from exhibition and distribution of cinematographic films. As some of the grounds taken are common, the two appeals are taken up together. 2. The grounds of appeal read: 1. "For that, in the facts and circumstances of the case, the learned Income-tax Officer was not justified in disallowing Rs. 3,000 from 'Car Allowance' paid to the Managing Director and that he learned Appellate Assistant Commissioner was also not justified in upholding the disallowance made by the learned Income-tax Officer." 2. "For that the learned Income-tax Officer had also no justification in his disallowance of Rs. 1,475 from bonus accounts and the learned Appellate Assistant Commissioner was not justified in upholding the action of the learned Income-tax Officer." The Managing Director of the company, drew a sum of Rs. 3,000 as…

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