TaxTMI 
TaxTMI 
1980 (3) TMI 127
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....espect of the subject-matter observed as under:- "Loans and advances written off as irrecoverable: The assessee has claimed deduction of the following amounts: (1) Irrecoverable advance written off Rs. 7,80,485 (2)............ (3) Regarding loans- (a) Nutun Assamiya (P) Ltd. (743579+15156) 7,58,735 (b)............ Regarding Investment: (a) 1500 shares of Nutun Assamiya (P) Ltd. 1,50,000 (b) 25 shares of 100 each of Ramdhenu Press (P) Ltd. 2,500 1,52,500 In the above two closely held companies the partners of this firm are interested. On the last working day of the year i.e., on 30th Dec., 1972 the assessee wrote off the entire dues including the share investments. The assessee's representative could not show any evidence to support that the loans are actually irrecoverable and become bad. On the contrary, the assessee did not take any step legal or otherwise whatsoever, for realisation of the amount from the above debtors. The company M/s. Nutun Assamiya (P) Ltd., is not struck off from the list of Companies by Registrar and it is therefore fully alive. Hence, to write off the shares i....
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....ve also gone through the books of accounts, details etc., produced and filed. I find that the facts regarding financial position of Nutun Assamiya Pvt Ltd. as on 31st Dec., 1971 and 31st Dec., 1972 as stated by the assessee's counsel, are correct. As regards loan and advances I find that Rs.67,362 was realised from 1972 to 1976. The assessee could have paid this amount to M/s. Boloma T.E. even if the entire amount could not be re-paid. Further, I find that there was a closing stock of Rs. 28,829. Nothing was mentioned about the closing stock as to what had happened i.e. whether it was disposed and if so, at what price etc. It, therefore, appears that about 28,829 was still available at the disposal of the M/s. Nutun Assamiya Pvt., Ltd. as on 31st Dec., 1972. There was no evidence, on the part of the assessee, of any attempt made to realise the advance/loan atleast to the extent of this amount. As regards the value of land and building at Rs. 2,45,000, there was no evidence to accept the assessee's submission that no price was paid and no rent was received. In any case even if the land was on lease, the building could have either been sold or let on rent. Further I find that shares ....
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....TO simply mentioned in the various assessment orders that the income taxable at 100 per cent is the interest amount of Rs. 82,360, Rs.1,36,611 and Rs. 1,62,137 in the asst. yrs. 1967-68, 1968-69 and 1969-70 respectively. The ITO has not mentioned any other facts in this connection. The AAC in the asst. yr. 1967-68 has simply pointed out that the objection of the assessment is against the assessment at 100 per cent of a sum of Rs. 82,360 which was received by the assessee as interest. The AAS has pointed out that the interest credited is Rs. 82,000 and the interest debited is Rs. 45,000 and that as regards the debit the ITO has allowed 40 per cent deduction whereas he insisted in treating the credit at 100 per cent for taxation which was untenable and, he therefore, held that the sum of Rs. 82,360 should be accorded the same treatment under r.8, namely 40 per cent of it is to be taxed. Following this order he held that in the asst. yrs. 1968-69 and 1969-70 amount of interest receivable at Rs.1,36,611 and RS. 1,62,137 should also be taxed at 40 per cent. Thus, neither the ITO nor the AAC have discussed any facts in any of the three assessment years. They have not pointed out as to ho....
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....od from 1972 to 1976; (vii) that there was no evidence on the part of the assessee to show that any attempt was made to realise the advance-loan atleast to the extent of Rs. 28,829 which amount was still available and was at the disposal of the M/s. Nutun Assamiya (P) Ltd, by way of closing stock; (viii) that shares to the tune of Rs. 4 lakhs were still held by M/s. Nutun Assamiya (P) Ltd, in M/s. Offset Printers (P) Ltd; (ix) that even if the above shares could not be converted into cash, the assessee should have tried to realise a part of the loan-advance by getting above shares transferred in favour of the assessee; (x) that it appears that the assessee has made no attempt in the above direction i.e., getting the shares transferred in its favour; (xi) that the balance sheet of M/s. Nutun Assamiya (P) Ltd, as on 31st Dec., 1972 revealed huge deficits, out this fact alone could not be the reason for accepting the assessee's claim. 10. Vide orders dt 25th Jan 1975 made in ITA Nos. 162, 163 and 164 (Gau) of 1973-74 relating to asst. yrs. 1967-68, 1968-69 and 1969-70, this Bench of the Tribunal at Gauhati has since accepted the factum of the assessee being indulging....
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.... irrecoverable in the accounts of the assessee for that previous year. 14. The debt has been taken into account in computing the income of the assessee for an earlier previous year as also that the assessee lent money in the ordinary course of the business and further that the assessee was indulging in money lending as a business which was carried on by the assessee regularly, stands proved by the findings of this Bench of the Tribunal made in ITA Nos. 162 to 164 (Gau) of 1973-74 relating to the asst. yrs. 1967-68 to 1969-70. The fact that the said bad debt has been written off as irrecoverable in the accounts of the assessee, stands proved from the orders of the lower authorities who have held that the write off of the debt was premature. 15. The conditions laid down in s. 36 (2) of the Act, accordingly stand fulfilled and under s. 36 (1) (vii), the amount of bad debt or part thereof, which is established to have become a bad debt in the previous year, merits to be allowed as deduction in computing the total income of the assessee and in the case of the assessee the very fact that the lower authorities have held that the debtors M/s. Nutun Assamiya (P) Ltd. has suffered huge....
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....int of time or in a particular year is not conclusive of the matter, but is not wholly or totally irrelevant. This will be a material circumstance unless it can be shown or established from the materials on record that the write off was not proper or Bona fide. That this was so can be established even by a reference to the subsequent conduct of the assessee from which it is possible to infer definitely that the assessee still considered the debt or at least a part thereof as recoverable or regarded the debtor as financially solvent. The fact that the assessee had not taken steps by way of legal proceedings against the debtor would not automatically justify the finding that he was not entitled to write off the amount as bad debt. Nor would the fact that an assessee, subsequent to the write off of a debt, continued legal proceedings against the debtor necessarily had come to the conclusion that the write off was improper or lacked Bona fides. These would be factors to be taken into account in order to arrive at a proper determination of the question. Mere notices served for winding up a debtor-company or launching criminal prosecution or inducing other authorities to launch criminal ....