NEW INDIA INVESTMENT CORPORATION LTD Vs. INCOME TAX OFFICER
HIGH COURT OF CALCUTTA
NEW INDIA INVESTMENT CORPORATION LTD
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D.K.Sen, J. -
(1.) New India Investment Corporation Ltd., the petitioner, was at the material time and still is an assessee within the meaning of the I.T. Act, 1961. The petitioner's income, it is alleged, consists of, inter alia, profits from dealing in shares, dividends, interest on loans and interest from Government securities. The petitioner maintains its accounts in accordance with the mercantile system.
(2.) It is alleged that in 1970, the petitioner advanced money on interest to Bagla & Co. At the beginning of the accounting year 1972 the balance due from Bagla & Co. was Rs. 12.10 lakhs. Bagla & Co., it is alleged, had financial difficulties and on the 3rd August, 1972, an agreement was entered into by and between the petitioner and Bagla & Co. which provided that Bagla & Co. would repay the principal amount of the advance in instalments and that no interest would be charged by the petitioner in respect of the amounts outstanding in the past and also in the future. It is alleged that this agreement was entered into by the petitioner on the ground of commercial expediency. In the profit and loss account of the petitioner for the accounting year 1972 the amount of interest accrued up to the 31st December, 1971, being Rs. 32,050.69, was written off as a bad debt.
(3.) The petitioner alleges that it had also advanced money on interest to Central Cotton Mills Ltd., which became a sick undertaking, closed down on the 1st of June, 1970, and remained closed till the 3rd March, 1972, when the management thereof was taken over by the Govt. of India and thereafter by the National Textile Corporation Ltd. From the balance-sheet of Central Cotton Mills Ltd. as on the 31st March, 1971, it appeared that there was little chance of recovery of the unsecured loan advanced by the petitioner. The Sick Textile Undertaking (Nationalisation) Ordinance, 1974, under which compensation was payable for taking over of the undertaking provided that such compensation would be utilised first for payment of secured loans and other prior claims and thereafter for payment of unsecured loans. By reason of the aforesaid and as advised, the petitioner did not provide for interest due on the said loan amounting to Rs. 1,16,100 in the accounting year 1972.;
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