Deduction for bad and doubtful debts must be computed after set-off of brought forward losses, and contrary findings can be reviewed.

A deduction calculated as 7.5% of total income for bad and doubtful debts had to be worked out only after setting off brought forward losses, because that reflected the settled method of arriving at total income. The earlier contrary observation was treated as an error apparent on the face of the record, so the review was allowed and the earlier judgment was modified on that question. The issue was answered in favour of the Revenue and against the assessee, and the appeal was dismissed.

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Issues: Whether the deduction at the rate of 7.5% of total income towards bad and doubtful debts was to be computed before or after setting off brought forward losses, and whether the earlier contrary finding required review.

Analysis: The earlier judgment was found to contain a contrary observation on the mode of computation. On review, the Court treated the inconsistency as an error apparent on the face of the record and applied the settled position that the deduction should be worked out only after setting off brought forward losses so as to arrive at the total income.

Conclusion: The question was answered in favour of the Revenue and against the assessee.

Final Conclusion: The review petition succeeded, the earlier judgment was modified on the said question, and the appeal stood dismissed.

Ratio Decidendi: A deduction computed as a percentage of total income must be calculated after set-off of brought forward losses where the settled legal position so requires, and a contrary finding is amenable to review for error apparent on the face of the record.

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