COMMISSIONER OF INCOME TAX Vs. MANSATA FILM DISTRIBUTOR

JUDGEMENT

(1.) The Tribunal has referred the following questions of law to this court under Section 66(2) of the Indian Income-tax Act, 1922 ("the Act") :

(2.) The question of law relates to the assessment year 1958-59 for which the accounting period was the year ended on March 31, 1958.

(3.) The dispute involved in the questions before this court pertains to the claim of allowance of a bad debt or loss incurred by the assessee in the course of its business as film distributors in a sum of Rs. 1,61,531. The said amount had been debited in the profit and loss account as being irrecoverable from the producer and director, Sorab Modi of Bombay, and represented advances made for production of two pictures Waris and Galib. The pictures were neither produced nor received by the assessee at any time. Dispute accordingly arose between them and suits were filed by each of them against the other. As nothing, according to the assessee, could be recovered from the producer and distributor, Sorab Modi, it had no alternative but to write off the amount. The Income-tax Officer rejected the claim for deduction of the written off bad debt and added back the said amount to the total income of the assessee for the assessment year under consideration. Aggrieved by the said order, the assessee brought the matter by way of an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner held that the said claim was premature. The assessee then brought the matter by way of appeal to the Tribunal and the Tribunal held as follows :