High Court allows genuine business loss deduction, disagrees with Tribunal, judges concur.

The High Court held that the loss claimed by the assessee was genuine, occurred in the course of business, and should be allowed as a deduction. The court disagreed with the Tribunal's reasoning that the loss was not "actual and present" for the relevant year due to the pending suit, ruling in favor of the assessee. Judges C. K. Banerjee and Dipak Kumar Sen concurred with the decision in favor of the assessee.

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Issues involved: Assessment of loss claimed by the assessee as a deduction for the assessment year 1969-70.

Facts: The assessee, a firm of solicitors, had a current account in a bank from which a sum of Rs. 30,000 was wrongly debited due to a forged cheque. The bank refused to credit the amount back, leading the assessee to file a suit against the bank. The Income Tax Officer (ITO) disallowed the deduction of Rs. 30,000 claimed by the assessee as a loss, citing the pending suit as the reason.

AAC's Decision: The Appellate Assistant Commissioner (AAC) found that the loss claimed was admissible for the purpose of the assessee's business as it was incidental to conducting business operations. The AAC also noted that if the assessee recovered the amount in the future, it would be treated as income in the relevant subsequent year.

Revenue's Appeal: The revenue appealed to the Income-tax Appellate Tribunal, arguing that the loss did not arise in the course of the assessee's business and that it did not occur in the year under appeal. The Tribunal found that while the loss was incurred in the course of business, it could not be allowed for the year under appeal due to the pending suit against the bank.

Tribunal's Decision: The Tribunal acknowledged that the loss was incurred in the course of the assessee's business but held that it was not "actual and present" for the year under appeal due to the pending suit. The Tribunal allowed the appeal of the revenue.

Legal Arguments: The assessee contended that the loss was incurred in the course of business and should be treated as incidental thereto, regardless of the pending suit. Reference was made to relevant provisions of the Income Tax Act and a precedent where a similar loss was allowed as a deduction.

Court's Decision: The High Court held that the loss suffered by the assessee was genuine and had occurred in the course of business. The court disagreed with the Tribunal's reasoning that the loss was not "actual and present" for the year under appeal due to the pending suit. The court found in favor of the assessee, stating that the loss should be allowed as a deduction. The question referred was answered in the negative and in favor of the assessee.

Judges' Decision: Both Judges, C. K. Banerjee and Dipak Kumar Sen, concurred with the decision in favor of the assessee.

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