Case: M/s. Amarchand Sobhachand Vs. Commissioner of Income-tax, Madras

M/s. Amarchand Sobhachand a firm registered under the Indianx Act, 1922, carried on business at Madras in drugs, chemicals. mercury, camphor and silk yarn and as. There were two partners of the firm — Mohanlal Sagmal and. Seshmal Sobhachand, and Ramniklal and Lakshmichand minors were admitted to the benefits of the partnership, each with 7/32 share in the profits. The appellants had for a long time business relations with a firm styled Bhojaji Sobhachand carrying on business at Bombay as importers of yarn and also as agents and adathias. Sobhachand, one of the partners of Bhojaji Sobhachand with 16 percent. share in the profit and loss is the father of Seshmal, Ramniklal and Lakshmichand, partners of the appellantsAt the end of Samvat Year2003 Cr.16,951,003. In the assessment forx of the appellants for the assessment year3 relevant to the account year Samvat 2007 an item of Rs.0 in the account of the Bombay firm was disallowed by thex Officer, but in appeal the amount was allowed4. In the return of income for the assessment year4 the appellants claimed allowance for Rs. 2,68,385 due from the Bombay firm at the foot of their running account as a bad debt written off as irrecoverable. Thex Officer disallowed their claim holding that:these transactions were mere accommodations which can have no bearing to the regular business carried on by the assessee5. The Appellate Assistant Commissioner agreed with thex Officer. He held that the debt did not arise in the course of the appellants business as chemists and druggists nor in the course of theirx Appellate Tribunal accordingly confirmed the order of the Appellate Assistant Commissionerm then applied to the Tribunal to refer the following question to the High Court of Madras:Whether on the facts and in the circumstances of the case the disallowance of the bad debt of Rs. 2,68,385 is right in law?7. The Tribunal rejected the application, but pursuant to an order made by the High Court of Madras under section 66 (2) submitted a statement of the case on the following question:Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the debt of Rs. 2,68,385 was not one incurred in the course ofg business of the assessee?8. In the opinion of the High Court the debt of Rs. 2,68,385 due to the appellants was not a bad and doubtful debt in itsg business nor a debt representing loss sustained in the other business. The question referred was, therefore, answered in the affirmative and against the appellants.

Reasoning: 14. The statement submitted by the Tribunal is also inadequate. It contains only a summary of the business relations between the appellants and the Bombay firm, a statement as to the accounts due at the end of each year at the foot of the account, the interest if any charged and a summary of the orders made by thex Officer the Appellate Assistant Commissioner and the Tribunal. The statement of the case does not analyse the evidence and throws no light upon the two branches of the argument raised before the Tribunal and which, in our view, arose out of the question on which they were required to submit a statement of the case22. It is true as contended by the learned Counsel for the assessee that the conclusions reached by the Tribunal are not supported by proper discussion of the material before it. It is also true that the Tribunal after cataloguing the arguments advanced at the bar, has come to certain abrupt conclusions, but all the same it cannot be denied that the findings reached by the Tribunal are findings of fact and those findings are supported by the evidence on record. The Tribunal has found that the monies sent by the assessee to the Bombay firm were not loans made in the ordinary course of itsg business, nor in respect of any other business of the assessee. This finding covers the entire amount sought to be deducted. In view of this finding, which is binding on this Court, our answer to the question reframed has to be in the negative and in favour of the Departmen