COMMISSIONER OF INCOME-TAX Vs. DAYACHAND HARDIAL

JUDGEMENT

(1.) THE matter here concerns the writing off of an unpaid debt.

(2.) THE assessee-firm, Daya Chand Hardial, Amritsar, as selling agents of Delhi Cloth and General Mills Ltd. , sold goods on credit to Hari Ram Bhagat Ram. According to the copy of the account of this party in the books of the assessee-firm filed before the Income-tax Officer, at the end of the accounting year on June 30, 1972, there was a debit balance of Rs. 51,186. During the accounting period 1972-73, Hari Ram Bhagat Ram made no purchases from the assessee-firm nor did they pay any amount to it. The balance, accordingly, remained the same, that is, a debit balance of Rs. 51,186. In the next accounting year 1973-74, Rs. 10,000 were paid by cheque on May 1, 1974, with the result that on June 30, 1974, the debit balance came down to Rs. 41,186. Another amount of Rs. 2,500 was paid on December 7, 1974, that is, during the accounting year 1974-75 which brought down this debit balance to Rs. 38,686 and this is where the matter stood on June 30, 1975, when the assessee-firm claimed this amount as a bad debt for the assessment year 1976-77.

(3.) THE claim of the assessee-firm to have the said amount of Rs. 38,686 treated as a bad debt in the assessment year 1976-77 was turned down by the order of the Income-tax Officer of November 16, 1976. The appeal against it was also dismissed by the Appellate -Assistant Commissioner on March 19, 1977. The Tribunal, however, by its order of October 30, 1978, allowed the claim treating it as a business loss or alternatively as business expenditure.