TaxTMI 
TaxTMI 
1974 (2) TMI 5
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....d the firm was dissolved some time in 1967-68. For the exploitation of forests, i.e., felling of trees, cutting the same into sizeable logs for conversion thereof by sawing into scantlings and carriage of the timber sawn to the banks of side stream for ultimately being floated down the Chenab river and carting and lorrying to the sales depots at Jammu and Pathankot, the assessee-firm had to engage various sub-contractors. These sub-contractors had to be given advances before coming to the works, besides supply of subsidised rations to the labour at the works. Both the advances as also the cost of rations supplied had to be recouped from the sub-contractors' earnings during the working season. Any balance left at a debit or credit gets carried forward to the year following, when again some advances had to be made for the labour to come out to the works. The assessee for the assessment year 1964-65 filed his return of income declaring a net loss of Rs. 1,72,669 and the expenses included, inter alia, the amount of Rs. 40,977 in respect of bad debts. After a scrutiny of the details of these bad debts the Income-tax Officer disallowed the bad debts amounting to Rs. 27,959 (as per detail....
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....the question already mentioned above and has made a reference to this court. At the time of the hearing it may be mentioned here that the learned counsel appearing for the assessee-firm conceded this position that he could not claim deduction on account of its being a bad debt if it did not come within the purview of section 36(2) of the Act, and this position was also not disputed that in this reference such matter cannot be gone into which relates to facts on the question whether it was a bad debt or not as contemplated by section 36 of the Act. Bat the learned counsel for the assessee-firm submitted that a perusal of the relevant sections of the Income-tax Act and a combined reading of the same in the light of several decisions of the courts on which he has relied, it would be clear that the assessee was entitled to a deduction under section 28 read with section 37 of the Act. It was also contended that the nature of business was such that the assessee had to keep his business going on, had to advance money to the sub-contractors because without doing so he would not have been able to get the labour in time and carry on the work. The system of the work was such that the advan....
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.... aforesaid case was in respect of the provisions contained in section 10(1), (2)(xi), (xv) of the Indian Income-tax Act of 1922, but it may be noted here that those provisions are similar to those contained in section 28 of the Income-tax Act of 1961. It was held that, while section 10(1) of the Indian Income-tax Act of 1922 imposes a charge on the profits or gains of a business, it does not provide how these profits are to be computed, and profits and gains which are liable to be taxed under section 10(1) are what are understood to be such under ordinary commercial principles. In another decision of the Supreme Court in the case of Commissioner of Income-tax v. Basumal Jagat Narain, which was a case where the assessee was a distributor and as an exhibitor of films he financed film producers against arrangement for distribution rights for certain defined territories. The assessee entered into an agreement with the producers of a motion picture of which the assessee acquired the right to distribute and exhibit in Northern India for five years from the date of delivery. The assessee agreed to pay a sum of Rs. 2,50,000 by way of advance in four instalments and was to recover in ful....
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....e facts of each case having regard to the nature of the operations carried on and the nature of the risk involved in carrying them out, and further that the degree of the risk or its frequency is not of much relevance but its nexus to the nature of the business is material. In another case, Commissioner of Income-tax v. Mysore Sugar Co. Ltd., a similar question came up for consideration. In that case the assessee company used to purchase sugar-cane from the sugar-cane growers and used to crush the same in the factory to prepare sugar. As a part of its business operations it used to enter into agreement at harvest season each year with the sugar-cane growers who are known commonly as " oppigedars " and used to advance to them sugar-cane seedlings, fertilisers and also cash. The " oppigedars " used to enter into a written agreement called the " oppige " by which they agreed to sell sugar-cane exclusively to the assessee-company at current market rates and to have the advances adjusted towards the price of sugar-cane, agreeing to pay interest in the meantime. It so happened that in the year 1948-49, due to drought, the assessee-company could not work its sugar mills and the " oppig....
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....ns 30 to 43. " In my opinion if section 28 is read along with section 29 then it would be clear that the computation of the income as contemplated by section 28 has to be in accordance with the provisions contained in sections 30 to 43 which means that it should be also in accordance with section 37 if the case falls under section 37. In the present case out of sections 30 to 43 the only sections which can be made applicable are either section 36 or 37. I have already stated above that the assessee-company's learned counsel is not relying on section 36 but is relying on section 37 and to me it appears that sections 28 and 29 read together do not show that if a case comes under section 36 then the applicability of section 37 will be taken out but rather it means that a case may come either under section 36 or section 37 and a computation may be made under either of the sections. It also appears that there is a clear distinction between a business expenditure and a business loss, the former is indicative of a volition but in loss it comes upon him so to speak as ab extra and I am also of opinion that non-capital expenditure incurred for the purpose of business would fall to be ....