COMMISSIONER OF INCOME TAX Vs. ALGEMENE BANK NETHARLAND

JUDGEMENT

(1.) IN this reference under s. 256(2) of the IT Act, 1961 ('the Act') for the asst. yr. 1979-80, the following questions of law have been referred to this Court:

(2.) SHORTLY stated, the facts are that the assessee, Algemene Bank Netharland, N.V., is a non- resident company doing banking business in India. The assessment year involved in this reference is 1979-80.

(3.) THE assessee appealed to the Tribunal and contended that the loans were given in the ordinary course of the banking business carried on by the assessee. In the calendar year 1978 which is the relevant previous year, the assessee came to the clear conclusion on the basis of the investigation made by it that these loans had become irrecoverable notwithstanding the fact that decrees had been obtained against the parties. Relying on the decision in the case of Jethabhai Hirji and Jethabhai Ramdas vs. CIT 1978 CTR (Bom) 415 : (1979) 120 ITR 792 (Bom), it was urged that the claim of the assessee should have been allowed as the assessee bona fidely believed that the loans had indeed become irrecoverable and so wrote off the same from its books of account. On the other hand, it was urged on behalf of the Department that there was still hope of recovery because of the decrees obtained by the assessee even though the investigation of the assessee showed that there were no assets of the debtors to satisfy the decrees.