- (1.) On an application under Section 256(2) of the Income-tax Act, 1961, this court has directed the Tribunal to refer the following question for the opinion of this court : "Whether the finding and conclusion of the Tribunal that irrecoverable debt was a capital loss were based on any wrong principles of law or ignoring the relevant piece of evidence or otherwise perverse ?" In compliance with this direction, the aforesaid question has been referred along with the statement of case for our opinion : During the course of assessment, the Assessing Officer has noticed that the assessee has claimed bad debt to the tune of Rs. 2,15,751, which has been written off by the assessee-company, in the name of Thakur Paper Mills Ltd. This amount related to the interest on loan of Rs. 4 lakhs advanced by the assessee-company to Thakur Paper Mills Ltd. The assessee claimed before the Tribunal that the loan was assigned to one Sterling Investment and Trading Company for the amount of Rs. 4 lakhs. That has been paid to the assessee for full and final settlement against the loan and interest payable by Thakur Paper Mills Ltd. That claim was rejected by the Income-tax Officer. According to him, the assessee failed to establish to prove that, that has become bad in this year.
(2.) In appeal before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) has also confirmed the view taken by the Assessing Officer that the debt has not become bad in this year. In any case, it can be a capital loss. The Tribunal has also taken the view that at the most, it can be claimed as a capital loss.
(3.) Heard learned counsel for the parties. Dr. Pal, learned counsel for the assessee, submits that the Commissioner of Income-tax (Appeals) allowed holding that it is a capital loss and that the loan was assigned to Sterling Investment and Trading Co. They wrote a letter dated April 1, 1980, to the assessee-company that as per discussions, they are prepared to pay Rs. 4 lakhs, in case the loan advanced to Thakur Paper Mills Ltd. was assigned to Sterling Investment and Trading Co. and loan includes interest also be taken for full and final settlement.;