BANSIDHAR PODDA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is the statement of a case under Section 66, Sub-section (3), Income-tax Act, by the Commissioner regarding the assessment upon the assessee. The facts which have given rise to the assessment and the history of the procedure may be stated thus. The assessee who appears to carry on a considerable business, keeps his account in the mercantile system and therefore his income in the year and the allowable deductions from that income are of a notional character and depend upon the state of affairs as properly shown by his books. The period under assessment is the Sambat year 1985-86 and the petitioner claimed as deduction from his income the sum of Rupees 30,580 as a debt which he said had become bad in that year.

(2.) A considerable time ago the assessee had advanced a sum of money to one Janki Das and by the Sambat year 1985-86 this had accumulated to the said sum of Rs. 30,580. From the year 1979-80 until the year 1982-83 there were acknowledgments by the debtor Janki Das in the books of the assessee and in each of those four successive years the total amount of the debt up to that date was stated together with interest for that year. The interest was compound interest and therefore there was a continuance of the transactions during those years, the amount of interest continually increasing, and inasmuch as the interest was of a compound character, the amount of the principal debt continued to increase. After the year 1982-83 no further interest was charged but a special demand charge was entered up in the books. Now inasmuch as the last acknowledgment by the debtor was in 1982-83 the period of limitation for the recovery of the debt expired in 1985-86.

(3.) The Income-tax Officer, before whom the matter first came, in this report to the Assistant Commissioner stated this fact and made the following statement: The civil law on the matter is that the assessee could not extend the limitation by book debit of interest, nor even by a stamped endorsement if the loan itself had become barred for realization. In fact the loan had become barred long ago and the assessee cannot put in a claim for deduction of this too old a bad debt. (sic) in the accounts of 1985-86. The item is therefore disallowed. The matter then came before the Assistant Commissioner and he took the same point of view as that adopted by the Income-tax Officer. There was then a petition under Secs.33 and 66, sub.s. (2) to the Commissioner and the Commissioner refused to state a case before the High Court, but dealt with the matter upon the same basis as that adopted by the Income-tax Officer and by the Assistant Commissioner.