SETH GANGA SAGAR R B Vs. INCOME TAX APPELLATE TRIBUNAL

JUDGEMENT

(1.) THIS is an application made under Section 66 (2) of the Indian Income-tax Act by one Rai Bahadur Seth Ganga Sagar Jatia praying that the Income-tax Appellate Tribunal be directed to state the case and to refer certain questions of law arising our of its order. During the pendency of this application in this Court, Rai Bahadur Seth Ganga Sagar Jatia died and his widow, Shrimati Indermani Jatia has been substituted in his place. The facts giving rise to these reference are very short and maybe stated as follows :-

(2.) LEARNED counsel for the appellant has contended that it was not for the Income-tax Department or the Income-tax Appellate Tribunal to determine when the debt in question became bad and that that question should be decided with reference to the time when the debt was written off by the assessee. It was further contended that so long as the limitations for recovery of the debt in question had not run out, it could not be said that the debt had become legally irrecoverable - the sense in which, according to learned counsel, the word " bad" has been used in clause (xi) to sub-section (2) of Section 10. We cannot accede to either of these contentions. Before clause (xi) was introduced in the Indian Income-tax Act, bad debts were always treated as a permissible deduction in computing the assessable income. Both these contentions were raised in the case of Commissioner of Income-tax, Central Provinces and Berar v. Sir S. M. Chitnavis. While repelling these contentions, their Lordships of the Privy Council came to the conclusion that "a debt, which had in fact become a bad debt before the conclusion that a debt which had in fact become a bad debt before the commencement of a particular year, could not properly be deducted in ascertaining the profits of that year, because the loss had not been sustained in that year." Their Lordships proceeded :-

(3.) FOR the reasons indicated above, we are of opinion that there is no substance in this application and we, accordingly, dismiss it with costs.