COMMISSIONER OF INCOME TAX CENTRAL Vs. KANIRAM HAZARIMALL

JUDGEMENT

(1.) This is a reference under Section 66(1) of the Income-tax Act, 1922. The assessee is a Hindu undivided family. This family carried on various business including money-lending. The year of assessment in question is 1953-54. The assessee was a partner in a firm styled Kaniram Jankidas of Daltonganj in which the assessee's share was 0-12-0 while that of the other partner was 0-4-0. Pending this partnership, the other partner Ramniranjan Kejriwal, withdrew from time to time certain amounts of money. Evidently he withdrew more money than what he was then entitled to on his own share. It may be that the sums the said partner withdrew from the said firm did constitute no debt on the dates of withdrawal. The said partner did not become on those dates a debtor either to the firm or to the other partner ; but the firm was dissolved during the year ending on 20th October, 1949.

(2.) Accounts were then taken of the said firm and it was found that Ramniranjan Kejriwal had withdrawn a sum of Rs. 52,903-14-0 in excess of what he would have been entitled to withdraw and, therefore, this sum was found due to the assessee during the year which ended on the 20th October, 1949. On the next date, that is, on the 21st October, 1949, in the money-lending books of the assessee kept in Calcutta, Ramniranjan Kejriwal was debited with this amount of Rs. 52,903 and odd. There is nothing before us to show whether Ramniranjan Kejriwal agreed to treat this debt as a loan to him. There is no promissory note executed by Ramniranjan Kejriwal in favour of the assessee in lieu of the said debt on accounting amounting to Rs. 52,903. All that appears to us from the records before us is that the assessee unilaterally on 21st October, 1949, debited the same amount of Rs. 52,903 against Kejriwal in his money-lending books. There is nothing before us to show that this Ramniranjan Kejriwal even paid any sum either on account of principal or interest to the assessee at any time but it has been stated that the assessee sought to charge Ramniranjan Kejriwal with interest by debiting him with a further sum of Rs. 3,868 and odd. This was merely in the money-lending books of the assessee but because it was in the money-lending books of the assessee and because it was thus chargeable, income-tax was charged and the department realised tax in two years on the sums charged as interest due to the assessee. It appears that thereafter there was a suit between the parties and an agreement was arrived at and by virtue of that agreement Ramniranjan Kejriwal agreed to pay a sum of Rs. 15,000 and the balance became irrecoverable because no decree was passed for the same.

(3.) Under such circumstances the assessee claims that the balance, which is Rs. 45,604, should be deducted and he should get allowance under section 10(2)(xi) of the Indian Income-tax Act, 1922, as a bad or irrecoverable debt.