A.K. Sen Gupta, J. - (1.) IN this reference under s. 256(1) of the IT Act, 1961, the following question has been referred to this Court for the asst. yr. 1979 -80 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the bad debts had been written off as irrecoverable in the accounts of the assessee for the asst. yr. 1979 -80 as required under s. 36(2)(i) of the IT Act, 1961 -
(2.) SHORTLY stated the facts are the assessee, a banking company, claimed the following bad debts : (i) Rs. 13,83,000 due by Ahmedabad Laxmi Cotton Mills Ltd. (ii) Rs. 8,14,547 due by India Paper Pulp Co. Ltd.
(3.) THE IAC (Asst.) noticed that the assessee did not square up the accounts and debtors by crediting the said amounts to their accounts and instead the assessee credited the said amounts of debts to the "Bad Debts Suspense Account" and debited to the profit and loss account. This according to the IAC (Asst.) did not amount to writing off in the accounts of the assessee for the previous year within the meaning of s. 36(2)(i) of the Act. He also noticed that the approval of the board of directors for writing off these debts was given in March, 1979, when the previous year had already ended on December, 1978. According to him the amounts in question were not written off in the accounts of the assessee for the calendar year 1978. Hence, the claim was not allowed. The assessee went in appeal before the CIT(A) who held that the assessee was entitled to the claim of these bad debts. The Revenue then came in appeal before the Tribunal. The Tribunal, following the judgment of the Gujarat High Court in the case of Sarangpur Cotton Mfg. Co. Ltd. vs : [1983]143ITR166(Guj) , held that the said debts were properly written off by the assessee. Thus, the Tribunal upheld the order of the CIT(A).;