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Bombay Samachar (P.) Ltd. Vs. Commr. of Income-tax, Bombay City-iii - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 94 of 1965
Judge
Reported in[1979]120ITR819(Bom)
ActsIndian Income Tax Act, 1922 - Sections 66(2)
AppellantBombay Samachar (P.) Ltd.
RespondentCommr. of Income-tax, Bombay City-iii
Excerpt:
.....prior to assessment year - reference court not concerned about correctness or otherwise of view taken by tribunal - unless view taken by tribunal on material before it is perverse court cannot interfere in reference. - - had acknowledged the said debt and the same was, therefore, alive in view of the acknowledgments, the last of which we dated 26th march, 1957. he alternatively contended that even if it was time-barred it had not become a bad debt as being irrecoverable. the court should, therefore, take it that it had become a bad debt in the year in which it was written off by the assessee. in my opinion, the following material which was before the tribunal clearly made it possible for the tribunal to take the view which it did, viz. 4,996 as a bad debt under the section..........to the sum of rs. 62,078 due to the assessee-company from another private limited company, viz., march private ltd., and the only question which arises in regard to the same is whether, on the material before the tribunal, any reasonable person could take the view that the said debt had become irrecoverable, not in the year of assessment but prior thereto. this is not a case in which the question arises as to whether there was any evidence to support the view of the tribunal that the debt had become irrecoverable well before the assessment year 1959-60, but is a case in which on the material before it the tribunal has taken the view that it has become irrecoverable and as such it had become a bad debt prior to that assessment year. the court is not concerned in the reference about the.....
Judgment:

Vimadalal, J.

1. This is a reference at the instance of the assessee, The Bombay Samachar (Private) Ltd., referring three questions to this court for its opinion under S. 66(2) of the Indian I.T. Act, 1922. These questions are set out in the first paragraph of the statement of the Case.

2. As far as the first question is concerned, the sum of Rs. 4,996 mentioned therein was the loss caused on account of devaluation of the Pakistani rupee on 1st August, 1955. Learned counsel for both the sides are agreed that that question is concluded, at any rate as far as this court is concerned, by two decisions of this court, the first being its decision in the case of CIT v. Mogul Line Ltd. : [1962]46ITR590(Bom) and the other being its decision in the case of CIT v. Mehboob Productions Pvt. Ltd. : [1969]74ITR676(Bom) . Question No. 1 referred to us must, therefore, be answered against the assessee.

3. As far as questions Nos. 2 and 3 are concerned, both of them relate to the sum of Rs. 62,078 due to the assessee-company from another private limited company, viz., March Private Ltd., and the only question which arises in regard to the same is whether, on the material before the Tribunal, any reasonable person could take the view that the said debt had become irrecoverable, not in the year of assessment but prior thereto. This is not a case in which the question arises as to whether there was any evidence to support the view of the Tribunal that the debt had become irrecoverable well before the assessment year 1959-60, but is a case in which on the material before it the Tribunal has taken the view that it has become irrecoverable and as such it had become a bad debt prior to that assessment year. The court is not concerned in the reference about the correctness or otherwise of the view taken by the Tribunal. If the view of the Tribunal was, on the material before it, a view which could not be said to be perverse, this court cannot interfere on a reference.

4. Mr. Vyas on behalf of the assessee made a valiant attempt on behalf of his client and formulated the following four propositions : (1) March Private Ltd. had acknowledged the said debt and the same was, therefore, alive in view of the acknowledgments, the last of which we dated 26th March, 1957. He alternatively contended that even if it was time-barred it had not become a bad debt as being irrecoverable. In support of the latter proposition, Mr. Vyas relied on the decision of the Patna High Court in the case of Bansidar Poddar v. CIT : [1934]2ITR20(Patna) . (2) The assessee had the option to write off that debt in any of the earlier years and there was no question of the assessee having obtained any advantage by writing it off in the assessment year in question. The court should, therefore, take it that it had become a bad debt in the year in which it was written off by the assessee. In support of that proposition Mr. Vyas relied on the decision of this court in the case of Lord's Dairy Farm Ltd. v. CIT : [1955]27ITR700(Bom) , but that case cannot help Mr. Vyas for what it lays down is that it is only 'in the absence of any evidence' that the court is entitled to presume that the amount became irrecoverable when the assessee wrote it off in its books of account. (3) The assessee reasonably took a decision to write it off in the assessment year in question in view of the Registrar's letter dated 28th February, 1958, proposing to take action for winding up the affairs of March Private Ltd. under the relevant provisions of the Companies Act, and (4) Resolution passed by the board of directors of March Private Ltd. at their meetings on 20th December, 1950, 20th December, 1954, and 25, June, 1955, also sufficiently establish that March Private Ltd. had reasonably entertained bona fide intentions of restarting the business and paying it debts.

5. These propositions of Mr. Vyas would have been worth considering if we were sitting in appeal over the decision of the Tribunal, which we are not. These propositions are only directed to show that the view taken by the Tribunal is not the correct view, but that is not sufficient for the assessee to succeed in this reference. In my opinion, the following material which was before the Tribunal clearly made it possible for the Tribunal to take the view which it did, viz., that the assessee's debt in question had become a bad debt well before the assessment year in question, and that view cannot be said to be perverse, or such as it contrary to the evidence, or one which no reasonable person could possibly take.

6. It is quite clear that except for the municipal bonds of the value of Rs. 10,000 for which the assessee-company took credit from March Private Ltd., there was absolutely no asset of March Private Ltd., left, out of which the balance of the debt of Rs. 62,078 to which questions Nos. 2 and 3 relate could possibly have been recovered. The so-called attempts made by the directors of March Private Ltd. to restart business was never more than pious hopes for the entertaining of which there was no basis at all. The minutes of the board of directors of March Private Ltd. held on 20th December, 1950, show that all that the chairman stated at the meeting was that he was confident that he would be able to find a suitable editor to resume the publication. The minutes of the meeting of the board of directors held on 20th December, 1954, contained only 'a hope' on the part of the chairman that a suitable party would be found to do the publishing business, and the minutes of the meeting of the board of directors of March Private Ltd. held on 25th June, 1955, also contained a statement by the chairman couched in terms of futurity that he would endeavour to make contracts with such firms of publishers as would be willing to extend their business to India and come to a working arrangement with March Private Ltd. The proposal made by V. Chitaley which is contained in his letter dated 2nd August, 1958, contains nothing concrete, and the major part of that letter is devoted by the writer to boosting his own performance in the filed of publication. The minutes of the meeting of the board of directors of March Private Ltd. held on 14th January, 1959, stated that Chitaley's proposal 'had to be dropped' as it involved financial risk. On this vague material, not only was it possible for a reasonable person to take the view that there was no prospect of March Private Ltd. resuming publication and paying of its debts, but it would be impossible for a reasonable person to take a contrary view. In view of non-existence of any assets and the vagueness of the so-called attempts of the board of directors of March Private Ltd. to restart business, in my opinion the view taken by the Tribunal is not only not perverse, but is a reasonable and a correct view. I would, therefore, answer questions Nos. 2 and 3 also against the assessee.

S.K. Desai

7. I agree and have nothing to add.

BY THE COURT. - The questions referred to us are answered as follows :

Question No. 1 : The Tribunal did not err in law or act without evidence or contrary to the evidence on record in not allowing the item of Rs. 4,996 as a bad debt under the section referred to in the said question.

Question No. 2 : In the affirmative.

Question No. 3 : The Tribunal did not err in law or act without evidence or contrary to the evidence on record in not allowing the sum of Rs. 62,078 as a bad debt under the section mentioned in the said question.

8. Assessee should pay the Commissioner's costs of the reference.


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