Law:

Section:

Section 36(1)(vii) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xi) of the Indian Income-tax Act, 1922] - Bad debts - Assessment year 1957-58 - Whether a person who advances moneys to a firm of which he is a partner can occupy position of a creditor or can be said to carry on business of money lending - Held, yes FACTS The assessee an individual, enjoyed income from property, shares in two registered firms, and other sources. He maintained a set of account books in which he recorded the amounts which he borrowed from others for the purpose of advancing of the two firms of which he was a partner. The share of the income received from the firms was credited in those books and the interest payments on borrowings were debited. The method of accounting adopted by him was the mercantile basis. Excluding the amount which he got towards his share of the income, he showed a loss of Rs. 14,982, under the head "Business" consisting of payments of interest, and a bad debt amounting to Rs. 9,000. As regards bad debt, it was explained that he had advanced Rs. 10,000 on 25-10-1951 to "Kotrika family" on interest at the rate of 12 per cent. For advancing this amount, he borrowed moneys on interest at 9 per cent. A ledger folio relating to the Kotrika family was opened and Rs. 10,000 was debited. No interest was debited to this account on an accrual basis in the subsequent years. On 30-9-1954, the members of the family became divided, and repaid in cash the entire debt due from it, with the interest due up to that date. The amount of interest was included in the income declared by the assessee for the assessment year 1955-56, and taxed. On the same day, the assessee made a fresh advance of Rs. 4,400 to each of the three brothers, who became divided, and separate ledger folios were opened. In 1955, all the three brothers filed insolvency petitions and on 29-11-1956, the assessee transferred these loans to one 'V' for Rs. 1,500 each. The balance of Rs. 3,000 due from each brother was written off in the ledger as a bad debt on the same day, viz., 29-11-1956, and this amount (Rs. 9,000), was claimed as bad debt. The claim was disallowed by the ITO, the AAC as well as…

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