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of <h1>High Court upholds Tribunal decision on bad debt claim by partnership firm engaged in forward business.</h1> <h3>Jadavji Narsidas & Co. Versus Commissioner of Income Tax, Bombay City</h3> Jadavji Narsidas & Co. Versus Commissioner of Income Tax, Bombay City - [1963] 47 ITR 411 Issues:1. Disallowance of a claimed bad and irrecoverable debt by the Tribunal.2. Determination of whether the debt became a bad debt in the relevant assessment year.Analysis:1. The case involves the assessment year 1949-50, focusing on a partnership firm engaged in forward business, including bullion transactions. The debtor incurred significant losses in silver settlements but also earned profits in other dealings. The firm claimed a debt of Rs. 2,23,162 as bad and irrecoverable, which the Income Tax Officer rejected, stating the debt had not become bad in the relevant year. The Appellate Assistant Commissioner upheld this decision, considering additional recoveries made by the firm. The Tribunal, on appeal, dismissed the firm's claim, leading to the reference of two questions to the High Court.2. The High Court found that the first question regarding the disallowance of the debt did not arise from the Tribunal's order, focusing instead on whether the debt became bad in the assessment year. The firm argued that various actions, such as filing a suit for recovery in the subsequent year, did not negate the debt's bad status. However, the Court held that the firm failed to establish a lack of reasonable expectation of recovery, citing legal precedents. It emphasized that the burden of proof lay with the assessee to show the debt's irrecoverability, which the firm could not demonstrate based on the record. The Court rejected the firm's contentions and answered the second question in the negative, affirming the Tribunal's decision.3. Additionally, the Court referenced a previous decision highlighting the challenges faced by assesses in claiming bad debts under Income Tax law. Despite partial recoveries made by the firm, the substantial outstanding amount indicated the eventual bad status of the debt. The Court emphasized the need for a sympathetic view by the department towards genuine cases of bad debts. Ultimately, the Court upheld the Tribunal's decision, directing the firm to pay the department's costs and concluding that the remaining debt had likely become bad in subsequent years.
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