COMMISSIONER OF INCOME TAX Vs. SANTOSH RICE MILLS

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Nagpur Bench, Nagpur, in pursuance of the direction contained in order dated September 19, 1989, of this court in M. C. C. No. 235 of 1983 on an application having been made to this court by the Commissioner of Income-tax, Jabalpur, under Section 256(2) of the Income-tax Act, 1961, has referred the following question of law for the opinion of this court :

(2.) THE respondent was assessed in the assessment year 1977-78, the previous year ending on Diwali 1976. THE assessee was supplying goods to one Seema Stores, Cuttack. THE assessee noticed that the financial position of the Cuttack party had become rather weak and considered it inadvisable to have further transactions with the said firm. On July 27, 1976, the assessee entered into an agreement with the Cuttack party whereby the assessee agreed to receive a sum of Rs. 12,000 in full and final settlement of the sums due from the Cuttack party. This agreement was acted upon and, consequently, the assessee wrote off the balance of Rs. 45,370 as a bad debt

(3.) WE have heard counsel for the parties, and perused the record.