Bad debt recovery taxability upheld where repealed-law write-off carried into the re-enacted income-tax scheme.

Section 24 of the General Clauses Act, 1897 preserves a write-off made under a repealed income-tax provision where the earlier and later enactments are not inconsistent. On that basis, bad debts written off under section 10(2)(xi) of the Income-tax Act, 1922 were treated as falling within the re-enacted scheme in sections 36(1)(vii), 36(2) and 41(4) of the Income-tax Act, 1961. Recovery of those debts was therefore brought to tax under section 41(4), even though the business had ceased to exist. The result was that subsequent receipts from recovered bad debts were assessable in the hands of the assessee.

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Issues: Whether amounts written off as bad debts under section 10(2)(xi) of the Income-tax Act, 1922, and recovered after the coming into force of section 41(4) of the Income-tax Act, 1961, were chargeable to tax in the hands of the assessee.

Analysis: Section 24 of the General Clauses Act, 1897 applies where a Central Act is repealed and re-enacted, and an order made under the repealed provision is deemed to be made under the re-enacted provision so far as the two are not inconsistent. The earlier provision in section 10(2)(xi) of the Income-tax Act, 1922 was treated as a composite provision corresponding to sections 36(1)(vii), 36(2) and 41(4) of the Income-tax Act, 1961. On that basis, a write-off under the repealed provision was held to be consistent with the re-enacted scheme, and recovery of the debt attracted the charging fiction in section 41(4), even though the business had ceased to exist.

Conclusion: The recovered amounts were assessable under section 41(4) of the Income-tax Act, 1961, and the assessee's objection failed.

Final Conclusion: Recovery of bad debts written off under the repealed law was brought within the re-enacted charging scheme, so the taxability of the receipts was upheld and the assessee obtained no relief.

Ratio Decidendi: Where a debt is written off under a repealed provision and the earlier and later enactments are not inconsistent, section 24 of the General Clauses Act, 1897 deems the earlier order to continue under the re-enacted provisions, enabling taxation on subsequent recovery under the successor charging section.

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