KESHAVALAL AND COMPANY Vs. STATE

JUDGEMENT

(1.) TWO interesting questions have been referred to us by the income-tax Appellate Tribunal under Section 66 (1) of the Indian Income-tax Act. They are :-- (1) Whether the Excess Profits Tax Officer was not justified in law in adopting the procedure laid down in the third proviso to Rule 1 of schedule I of the Excess Profits Tax Act, when the chargeable accounting period and the accounting period were not conterminous (2) Whether on the facts and in the circumstances of the case the writing off of Rs. 16,681 bad debts before 31st March, 1946, while the accounting period closed on 24th October, 1946, was a special circumstance to be taken into account in determining the profits of the chargeable accounting period ending 31st March, 1946.

(2.) THE assessee is a firm and carries on business in yarn and money-lending. THE assessment year for the purpose of income-tax is 1947-48 and the accounting year is Samvat year corresponding to 4th November, 1945, to 24th October, 1946. For the purpose of excess profits tax he adopted the Samvat year as the year of account and the chargeable accounting period came to an end on the 31st March, 1946, on which date the excess profits tax ceased to operate. During the accounting year it has been found by the Income-tax appellate Tribunal that the assessee incurred a loss of Rs. 16,681 by reason of bad debts and that they were written off in the accounts before 31st March, 1946. This was found to be bona fide by the Appellate Tribunal whose finding, therefore, must be taken as final.