RAO AND SONS Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) IN this reference made at the instance of the High Court, under Section 66 (2)of the Income Tax Act, 1922, the question of law framed for consideration is:

(2.) THE assessee is an unregistered family firm carrying on business in moneylending. The aforesaid question relates to the assessment for the financial year 1959-60 corresponding to the accounting year 1958-59.

(3.) THE claim of the assessee is that in the course of the money-lending business it had during the financial years 1950-51 to 1953-54, advanced loans to one Bhikary ram, in all amounting to Rs. 2, 51,593. 00 to procure and supply stationery articles to the Orissa Government Press. This Bhikary Ram was admittedly at all relevant times working as the registered clerk of Mr. Rao, who was the senior partner of the firm, and an Advocate of this Court. Out of the aforesaid sum of Rs. 2,51,593. 00 a sum of Rs. 1,50,373. 00 during that period was from time to time in various instalments paid back, Thus, at the end of the period the balance amount of Rs. 1,01,220. 00 was left unpaid. Mr. Bhikary Ram could not pay it and on the 5th February 1956, he wrote a letter to the assessee, promising therein that he would pay up the entire balance amount by 31st March 1956. But that promise also failed, and no payment was made. Ultimately, therefore, in the accounting year 1958-59 this sum of Rs. 1,01,220 was written off as a bad debt, and in the corresponding assessment year 1959-60 a claim was made by the assessee that this amount should be allowed as a deduction under Section 10 (2) (xi) of the Income Tax Act, 1922. The Income tax Officer did not accept the claim and directed that-