Repossessed vehicles not stock-in-trade; revaluation loss and bad debt claim under Income-tax Act were disallowed.

Vehicles repossessed by an assessee-financier could not be treated as its stock-in-trade because they remained registered in the hire-purchasers' names, so the assessee was not the owner at the relevant time. No loss on revaluation of those vehicles could therefore be claimed, and the claim could not be recast as a trading loss under section 28. The fact that the assessee carried on money-lending business did not change the result, because the loss was not shown on the facts to be a deductible bad debt under section 36(1)(vii) read with section 36(2).

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Issues: Whether the vehicles repossessed by the assessee-financier could be treated as its stock-in-trade so as to permit deduction of loss on revaluation, and whether the claim was alternatively allowable as a bad debt under section 36(1)(vii) read with section 36(2) of the Income-tax Act, 1961 rather than as a trading loss under section 28.

Analysis: The vehicles stood registered in the names of the hire-purchasers under section 24 of the Motor Vehicles Act, 1939, and on that basis the assessee was not the owner of the vehicles at the relevant time. As a result, the vehicles could not be regarded as the assessee's stock-in-trade, and no loss on revaluation of those vehicles could arise. The claim could not be converted into a trading loss deduction under section 28. The view that the assessee carried on a money-lending business did not alter the position, because the loss claimed was not shown to be a deductible bad debt on the facts found.

Conclusion: The claim for deduction was not allowable. The reference was answered against the assessee.

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