2005 (4) TMI 20

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....8-79. Briefly stated, the facts giving rise to the present reference are as follows: The assessee is a corporation wholly owned by the U.P. Government established for the purposes of promoting small scale industries in the State. The Government of U.P. sanctioned certain amounts for different schemes, which were not connected with the assessee's business but for which the assessee's assistance was obtained by the Government. An amount of Rs. 17,93,000 was sanctioned vide Government order dated March 25, 1975, for certain schemes to be executed with the assistance of the assessee for and on behalf of the Government. The intention was that 50 per cent, of the aforesaid amount was to be regarded as grant-in-aid and the balance as a loan. One....

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....ed by the Government and became irrecoverable. Before the Inspecting Assistant Commissioner (Assessment) the assessee claimed that the transaction was in the nature of a liability accruing to the assessee according to the earlier Government Order, which became irrecoverable in later years like a debt becoming bad which had to be written off in a subsequent year. However, the Inspecting Assistant Commissioner (Assessment) disallowed the same on the ground that deduction was not allowable though the amount might have been wrongly assessed earlier. He held that the liability should relate to the business activities and that the above amount did not relate to the assessment year 1978-79. In appeal, the Commissioner of Income-tax (Appeals) hel....

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....ed in the assessment year 1980-81 would, in our view, not materially affect the position. The Government D.O. dated March 31, 1977 and December 27, 1977, were received by the assessee in the assessment year in question and, therefore, in our view the assessee was quite justified in claiming the deduction for Rs. 6,02,125 as a trading loss. We hold accordingly." We have heard Sri Shambhu Chopra, learned standing counsel for the Revenue. Nobody has appeared on behalf of the respondent-assessee. The only point pressed by learned standing counsel is that the grant of Rs. 6,02,125 was assessed in the assessment year 1976-77 as an income of the respondent-assessee and vide D.O. dated March 31, 1977, the State Government decided to convert the g....