TaxTMI 
TaxTMI 
1968 (11) TMI 11
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....en taken of the said firm and it was found that Ramniranjan Kejriwal had withdrawn a sum of Rs. 52,903-14-0 in excess of what he would have been entitled to withdraw and, therefore, this sum was found due to the assessee during the year which ended on the 20th October, 1949. On the next date, that is, on the 21st October, 1949, in the money-lending books of the assessee kept in Calcutta, Ramniranjan Kejriwal was debited with this amount of Rs. 52,903 and odd. There is nothing before us to show whether Ramniranjan Kejriwal agreed to treat this debt as a loan to him. There is no promissory note executed by Ramniranjan Kejriwal in favour of the assessee in lieu of the said debt on accounting amounting to Rs. 52,903. All that appears to us from the records before us is that the assessee unilaterally on 21st October, 1949, debited the same amount of Rs. 52,903 against Kejriwal in his moneylending books. There is nothing before us to show that this Ramniranjan Kejriwal even paid any sum either on account of principal or interest to the assessee at any time but it has been stated that the assessee sought to charge Ramniranjan Kejriwal with interest by debiting him with a further sum of Rs....
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....me tax applied for a reference to this court and the matter has been referred to this court where the question for reference is as follows : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount of Rs. 45,605 was not a capital loss but was allowable as a bad debt of the money lending business under section 10(2)(xi) of the Indian Income-tax Act ? " Before we enter into the question itself, some doubt has been raised by Mr. Jyotish Chandra Pal as to the meaning of the question referred to. According to Mr. jyotish Chandra Pal the phrase capital loss " refers to the " capital loss of the money-lending business. Therefore, according to him the question for decision is : " Whether there was a capital loss in the money lending business or there was a bad debt in the money lending business? " We, however, do not agree because we find that before the Income-tax Officer as well as before the Tribunal and at all stages of the proceedings the case of the department was that it was a capital loss in the partnership business of the assessee with Ramniranjan. The department's case was that the money due to the assessee on accounting ....
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....hat there were certain facts before the income-tax authorities and the Tribunals below ; on those facts the authorities came to a conclusion that this debt subsequently became a loan in the moneylending business. According to Mr. J. C. Pal, the factors which were present were that Ramniranjan Kejriwal became liable to the assessee for payment of a certain sum. That sum was transferred to the money-lending account of the assessee. Thirdly, income-tax was charged on the amount of interest noted in the books of account. Fourthly, a suit was brought by the assessee against Ramniranjan and the matter was settled at Rs. 15,000 and finally the balance of the money due became irrecoverable. From these facts, Mr. J. C. Pal says, the authority below came to a conclusion on a mixed question of fact and law as to whether the debt on accounting had become by act of parties and by operation of law a loan and a part of the money-lending business of the assessee. The Tribunal has accepted the view that it became a loan for the reason that it was transferred to the money-lending account; and further because income-tax was paid on interest. The Tribunal has referred to a decision of the Supreme Cour....
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....er and borrower would arise between the parties because of an agreement between themselves. There is no evidence like that. A debt on accounts may give rise to a loan if both the parties so agree. We have absolutely no evidence regarding what did Ramniranjan do in the matter. The Tribunal below did not come to any finding of fact on the evidence before them as urged by Mr. Jyotish Chandra Pal. They followed merely the judgment of the Supreme Court in Commissioner Income-tax v. R. S. A. Sankara Ayyar, where the circumstances appeared to be similar ; the transaction in that case was a loan at its inception and there was a practice or usage in Madras where the creditors could separate at joint loan into separate loans by act of the creditors without reference to the debtors. Therefore, the-proposition which was established by the Supreme Court could not have been applied to the facts of the case before us. Here the original transaction was not a transaction of a loan. Secondly, there is no practice, usage or custom known in Bengal or in Bihar where such an accounting liability could be converted into a liability as loan without reference to both the parties by merely including it in t....
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....-tax authorities. But then there is nothing before us to show that when the department realised taxes for two years on the interest any dispute was raised by anybody. There is nothing before us to show that the parties had any opportunity to adduce full and complete evidence on the matter. There is also nothing to show that the Income-tax Tribunal at the earlier stage did decide that dispute at all. Merely because tax was realised it may be said that the sum was treated as loan and the amount was treated as interest but it cannot be said that the amount was found by the Income-tax Officer to be interest nor can it be said that the amount due was found by the Income-tax Officer to be loan. We have been referred to a judgment of the Bombay High Court where it has been said that ordinarily the doctrine of estoppel may not apply to decisions of the Income-tax Tribunal but there are certain limitations. There may be limitations but the question whether it was loan or not, not being raised specifically before the Income tax Officer at the earlier proceeding and no dispute being raised, there was no occasion for him to decide the said question; no question of any limitation to the doctrin....