AMARCHAND SOBHACHAND Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference arises out of the assessment for the year 1953-54 of Messrs. Amarchand Sobhachand, a partnership concern carrying on business at Madras as chemista dn druggists. They did business in camphor, mercury and other products and in making forward contracts in artificial silk yarn. Another branch of the firms activity was in money-lending. The accounts of the business were kept on the mercantile basis. For the assessment year 1953-54, the year of account was the previous Samwat year 2008, which ended on October 18, 1952. During that year, the assessee wrote off sum of Rs. 2,68,385 as bad debt in its money-lending business. THIS sum represented the entire balance due in respect of its dealings with another firm at Bombay, Bojaji Sobhachand. The assessee claimed a deduction in respect of the amount aforesaid in the course of the assessment for the year referred to above. To appreciate the justification for the claim a few more facts have to be mentioned.

(2.) THE assessee-firm, at the material time, consisted of two major partners and two minors, who had been admitted to the benefits of the partnership. One of the major partners and the two minors are the sons of one S. Amarchand, and all of them put together have a 11/16 share in the assessee-firm. S. Amarchand was a partner in Messrs. Bojaji Sobhachand, to be referred hereafter as the Bombay firm; his share in that firm was 16 per cent.

(3.) THE Tribunal was then directed to refer the following question under section 66(2) of the Act :