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R.K. Kamakshi Chettiar Vs. Commissioner of Income Tax, Madras - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberCase Refd. No. 28 of 1955
Judge
Reported inAIR1960Mad516; [1960]39ITR104(Mad)
ActsMadras Agriculturists' Relief Act, 1938 - Sections 9-A and 10(2)
AppellantR.K. Kamakshi Chettiar
RespondentCommissioner of Income Tax, Madras
Excerpt:
- - 6125 the assessee wrote off as an irrecoverable bad debt, and claimed it as a deduction under s. the irrevocability having been established independently of the solvency or otherwise o the debtor and the genuineness of the transaction not being in issue, we fail to see how the assessee's right based on s. the requirements of the section the assessee satisfied in this case;.....of the statute alone being pleaded to justify the write-off. the write-off was really based on a fresh agreement between the parties superseding the old contract. under the fresh agreement, the assessee became entitled to receive rs. 6125 less and it was this sum that was treated as irrecoverable. there can be no doubt that after the fresh contract was concluded, the old contract was not enforceable, and in that sense rs. 6125 was irrecoverable. the irrevocability having been established independently of the solvency or otherwise o the debtor and the genuineness of the transaction not being in issue, we fail to see how the assessee's right based on s. 10(2)(xi) of the act could be denied. the requirements of the section the assessee satisfied in this case; and it is apparently on a.....
Judgment:

Rajagopalan, J.

(1) We answer the question in the affirmative and in favour of the assessee.

(2) Under the terms of the contract between himself and the debtor, the assessee was entitled to the sum of Rs. 35,000, which was secured by an usufructuary mortgage; that was the principal of the debt advanced. That the debt was advanced in the course of the money-lending business of the assessee does not appear to have been seriously at issue at any stage between the Department and the assessee.

The usufructuary mortgage was effected on 29-1-1944. After S. 9-A of the Madras Agriculturists' Relief Act IV of 1938 came into force, the parties entered into an agreement in the course of the accounting year, 1949-50, which was to this effect: on the basis that the debtor would be entitled to proportionate reduction of the principal in proportion to the period during which the mortgagee-assessee had already been in possession, the amount due from the debtor was worked out. The assessee accepted Rs. 12,875 in cash and a promissory note for Rs. 16,000. These were taken in full discharge of the liability of the debtor-mortgagor under the deed of mortgage of 1944. The principal amount if should be remembered was Rs. 35,000. Actually under this arrangement of 1949, the assessee got only Rs. 28875/-. The balance of Rs. 6125 the assessee wrote off as an irrecoverable bad debt, and claimed it as a deduction under S. 10(2)(xi) in the course of the assessment proceedings for 1950-51.

(3) The genuineness of the transaction of 1949 was never in issue. It was not really a case of the operation of the statute alone being pleaded to justify the write-off. The write-off was really based on a fresh agreement between the parties superseding the old contract. Under the fresh agreement, the assessee became entitled to receive Rs. 6125 less and it was this sum that was treated as irrecoverable. There can be no doubt that after the fresh contract was concluded, the old contract was not enforceable, and in that sense Rs. 6125 was irrecoverable. The irrevocability having been established independently of the solvency or otherwise o the debtor and the genuineness of the transaction not being in issue, we fail to see how the assessee's right based on S. 10(2)(xi) of the Act could be denied. The requirements of the section the assessee satisfied in this case; and it is apparently on a wrong view of the scope of S. 9-A of Act IV of 1938 that the claim appears to have been ultimately decided by the Tribunal.

(4) As we stated before, we answer the question in the affirmative, and in view of the assessee having succeeded, the assessee is entitled to costs. Counsel's fee Rs. 250/-.

FD/V.S.B.

(5) Answer for assessee.


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