Law:

Section:

JUDGMENT Sen, J.-This is a reference under section 66(1) of the Indian Income-tax Act, 1922, hereinafter called the Act. In this reference the following question arises for our opinion : "Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,24,199 was deductible from the business income of the assessee either under section 10(1) or section 10(2)(xi) or section 10(2)(xv) of the Income-tax Act?" The Indian Aluminium Co. Ltd. is the assessee. It is a public limited company and has its registered office at Calcutta. The relevant previous year ended on December 31, 1954. The principal business of the assessee is manufacture of aluminium ingots, sheets and such other products from aluminium. Under an agreement dated January 31, 1947, between the assessee and one Messrs. Aluminium Laboratories Ltd., Montreal (Canada), the latter agreed to provide the assessee from time to time with technical information, engineering service and advice regarding development for an annual retainer fee. The Montreal Co. provided the assessee-company with technical information and advice on specific problems of production and manufacture of aluminium. In view of the agreement the assessee paid a total sum of Rs. 2,50,808 to the said laboratory between the accounting years ended on September. 30, 1944, and on September 30, 1950 In the year 1951, the Income-tax Officer treated the assessee-company as being in default under section 18(7) of the Act in respect of the amount of taxes which the assessee was liable to deduct from the payments made to the said Montreal company under the provisions of section 18(3A), 18(3B) and 18(3C) of the Act. The amount assessed was Rs. 1,24,199. The assessee entered into correspondence with Messrs. Aluminium Laboratories Ltd., Montreal, asking them for reimbursement of the aforesaid sum of Rs. 1,24,199. The latter refused to accept the assessee's claim for reimbursement and their repudiation was communicated to the assessee by their letter dated August 3, 1954. On obtaining such letter of repudiation, the assessee wrote off the amount during the relevant accounting year and claimed it as a bad debt deductible under section 10(2)(xi) of…

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