TaxTMI 
TaxTMI 
1982 (7) TMI 20
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.... debt ?" The reference relates to the assessment year 1962-63. The assessee is private limited company. The assessee had a running account with the partnership firm styled as M/s. Rallaram Melaram. This firm consisted mainly of the directors and/or shareholders of the assessee-company as partners. The assessee's credit balance with the said firm in 1952 was Rs. 28,203-6-9. In 1952, the business of the firm including its assets and liabilities was taken over by a private limited company styled as Nagrath Colliery Pvt. Ltd. floated for that purpose. The assessee had some transactions with this company till 1954. The firm, Rallaram Melaram, and the company, Nagrath Colliery Pvt. Ltd. were sister concerns of the asses The firm was also a selli....
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.... be taken to have become a bad debt in 1955, more than four years anterior to the account year ending on 31st December, 1961. In this connection reference to s. 36 (1)(vii) of the I.T. Act, 1961, is necessary. This section permits deduction of the amount of any debt or part thereof which is established to have become a bad debt in the previous year. A bad debt is thus allowable in an assessment year if it became a bad debt in the previous year relevant to the assessment year. However, even in those cases, where the ITO finds that the debt did not become a bad debt in the relevant account year but in an earlier account year, he can grant relief u/s.155(6) if is found that the debt became a bad debt within a period of four years immediately p....
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....e sister concerns of the assessee. Even after the expiry of limitation for bringing a suit on the debt, the assessee could have well expected the firm, and, after it was taken over by the company, the company would pay back the debt when their financial condition improves. It appears from the order of the AAC that the debtor-company hardly did any business for the first few years and had become defunct. It is, however, not clear as to when the company became defunct. The fact that the assessee-company wrote off the debt in a particular account year is not conclusive of the matter, but it is not wholly or totally irrelevant. The writing off of a debt by the assessee is material circumstance unless it can be shown from the materials on record....