G P SINGHI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) FOR the asst. year 1960 -61, the following question has been referred to us at the instance of the assessee :

(2.) THE relevant facts as set out in the statement of the case may conveniently be summarised first. The assessee was a partner in a firm known as M/s. Mahadeo Ganga Prasad in which he had a 55 per cent share. The said firm advanced a sum of Rs. 37,500 to M/s. Jai Hind Foundry Works Ltd. The debit balance owed by the company at the end of the year relevant to asst. year 1952 -53 was Rs. 84,190.14. This balance was carried forward till the financial year 1956 -57. There was a further debit of Rs. 2,250 in the asst. year 1958 -59. In the next year, a sum of Rs. 49,000 was credited on account of sale of the foundry and machinery to M/s National Engineering Works, Gwalior. The amount of Rs. 37,440.87 remaining in the account was written off as a bad debt on 31st March, 1960. This is the bad debt claimed by the assessee.

(3.) WHEN the ITO disallowed the bad debt, he did so because he found that M/s. National Engineering Works which had purchased the assets was a firm in which the assessee was himself a partner having a 50 per cent share. This was based on the statement of one Shri R.S. Ganeriwal. According to the assessee, he was not partner, but there was only a proposal for a partnership. There was also an account opened with the United Commercial Bank in the name of M/s. National Engineering Works on 16th Sept., 1959, in which the assessee and Shri R.S. Ganeriwal had been shown as partners.