ASSOCIATION BANKING CORPORATION OF INDIA LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference raises some interesting questions and it came up for hearing before Chagla, C.J., and myself on 19th March, 1958. As we shall presently point out, we decided one of the two questions and gave certain directions as to question (2) and required a supplementary statement of the case from the Tribunal [See Associated Banking Corporation of India Ltd. vs. CIT (1958) 34 ITR 557 (Bom) : TC14R.224]. The reference has once again come up for hearing before this Court.

(2.) THE assessee is a bank which went into liquidation on 21st April, 1947. The assessment year with which we are concerned is 1948 -49, and the liquidator made a return of the income of the bank for that year and in his return he claimed bad debts aggregating to Rs. 38,35,689. The liquidator also claimed as business expenditure an amount of Rs. 10,15,000, which represented a defalcation committed by M. C. Javeri, the bank's secretary, in respect of certain banking transactions. He also claimed as business expenditure a sum of Rs. 98,892, which represented another defalcation committed by the bank's secretary in respect of another transaction. The Tribunal held that the liquidator was not entitled to any deductions claimed by him. The questions, as originally referred to this Court on this reference, were as under :

(3.) QUESTION (2) referred only to business loss under S. 10(2)(xv). We felt that the claim made by the assessee might or might not fall under that provision and very likely it did not fall under that provision in view of the decision of this Court in the case of Lord's Dairy Farm (1955) 27 ITR 700 (Bom) : TC14R.212. We, therefore, reframed the question so as to read : "Whether on the facts and circumstances of the case, the assessee is entitled to claim two sums of Rs. 10,15,000 and Rs. 98,892, as a business loss or as a deduction under S. 10(2)(xv) of Indian IT Act ?"