MALIK, J. - (1.) IN this reference under S.66(2), Income -tax Act, the following questions have been referred to this Court for its opinion : "Q.1. Whether there was any evidence to justify the conclusion of the Tribunal that the debt of Rs.67,186/ - became bad before the year under consideration? Q.2. Whether the loss of business at Kanpur and at Calcutta can be legally allowed to be set off against the profits of the running business at Mirzapur? Q.3. Whether the expenses of the business at Kanpur and at Calcutta can be legally allowed as business expenses of the year under consideration?"
(2.) LEARNED counsel for the parties are agreed that the second question does not arise out of the appellate order of the Income -tax Appellate Tribunal and it is, therefore, not necessary to answer that question. The assessee is a firm carrying on business in cloth, money -lending and commission agency etc. with its head office at Mirzapur and its branches at Kanpur and Calcutta. A long time ago, the assessee had advanced a sum of Rs.67,186/ - to Jagannath Bagla, his uncle (his fathers sisters husband). In the year of account, the assessee wrote off this sum from his account books and, in his return, he showed it as a bad debt. The Income -tax Officer, however, came to the conclusion that the debt had not become irrecoverable in the account year in question but much earlier in Sambat 1990 and refused to grant the deduction.
(3.) THE other point in dispute was that the two branches at Kanpur and Calcutta had ceased to do further business in cloth, money -lending and commission agency but the premises and the skeleton staff were maintained to realise the outstandings of the business. The assessee had claimed that the expenses incurred therefor at those two branches were allowable as proper expenditure under S.10(2)(xv), Income -tax Act.;