2005 (5) TMI 64

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....to the present reference are as follows: For the assessment year in question, the respondent-assessee claimed bad debt of Rs. 1,49,433. on the advances made to M/s. La Medica (P) Ltd. of Delhi. Details of loan are given as under: -------------------------------------------------- Date of giving loan      Amount      Received back --------------------------------------------------      16-4-1977            50,000          600      11-3-1977          1,00,000      ....

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....M/s. La Medica (P) Ltd. in the year 1977. No interest was received from the company due to financial crisis. The respondent-assessee was 88 years of age and had also expired later on. During his lifetime, he tried his level best to recover the amount but he could recover a sum of Rs. 3,000 only despite several letters written to the company M/s. La Medica (P) Ltd. It was also mentioned that the company has written a letter to the respondent-assessee that it was not possible to repay the loan and any legal action against it would be a futile exercise. However, the Income-tax Officer was of the view that no legal action was taken against M/s. La Medica (P) Ltd., therefore, in the absence of any efforts to recover the amount, the claim of bad ....

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....ly lead to the conclusion that the write off was improper or lacked bona fides. The issue of recovery should be considered from the point of view of a businessman. Keeping in view the observations of the hon'ble Bombay High Court and applying the same to the facts of this case here, we find that the assessee had served a notice and in reply to that notice, the company has shown inability to pay the amount due to financial crisis. This is sufficient evidence to know that the amount is irrecoverable. Therefore, in the point of view of the businessman, the assessee has written off the debt as a bad debt. We, therefore, feel that the Commissioner of Income-tax (Appeals) has gone wrong in not allowing this amount as a bad debt. We, therefore, se....

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.... 188 ITR 534, this court has held that simply because, a criminal case was pending or a civil suit had not been filed, the claim of the assessee could not be left undetermined. Referring to the circular dated November 24, 1965, wherein it has been provided that the claim of embezzlement was allowable as a business loss in the year in which it was discovered this court has held that the Tribunal was not justified in holding that the assessee's claim of loss was premature. The court had held that the proper course for the Tribunal was to go into the matter and record its finding on the said plea. In the case of Kamla Cotton Co. v. CIT [1997] 226 ITR 605, the Gujarat High Court has held that the requirement that a debt has become bad or irr....