- (1.) THIS reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), is at the instance of the assessee.
(2.) THE following questions of law have been framed : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the trucks in respect of which finances on hire purchase finance basis had been advanced by the assessee to the various persons did not constitute the assessee's stock-in-trade and as such there could be no loss on account of the revaluation of the said trucks ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that assessee's claim squarely fell to be considered under Section 36(1)(vii) read with Section 36(2) and that it was not a trading loss entitled to deduction under Section 28 ? Whether, the Tribunal is justified in holding that the debts in question had not become bad during the accounting year under consideration and that the assessee was not entitled to a deduction of Rs. 1,00,000 in respect of the assessment year 1968-69 and of Rs. 7,924 in respect of the assessment year 1969-70 ?" 3. The controversy involved in the aforesaid reference relates to the allowability of two sums, viz., Rs. 1,10,000 and Rs. 10,000 towards the loss sustained by the assessee on account of repossessing vehicles in the assessment years 1968-69 and 1969-70, respectively. The facts stated in the reference are that the assessee is a company and derives income from hire purchase financing of trucks. Its accounting year is the financial year. In the assessment year 1968-69, it is alleged that the company took into possession (vehicles given on hire). These vehicles had been taken on hire purchase from the company by the persons shown in the chart given below, but since those persons defaulted in paying the stipulated instalments to the assessee-company, therefore, the company had taken possession of the vehicles. Vehicles repossessed in the accounting year 1967-68 (assessment year 1968-69) JUDGEMENT_137_ITR226_1997Html1.htm
(3.) SIMILARLY, during the accounting period corresponding to the assessment year 1969-70, it is alleged that the following vehicles were taken into possession by the assessee-company on account of default in payment by the hire purchasers detailed in the chart given below : Vehicles repossessed in the accounting year 1968-69 (assessment year 1969-70) Thus, the assessee-company estimated the possible loss on the above repossessed vehicles to the tune of Rs. 1,10,000 in respect of the assessment year 1968-69 and Rs. 10,000 in respect of the assessment year 1969-70, and accordingly these amounts were debited to the profit and loss account by the company and were claimed as legitimate expenditure.;