AMARCHAND SOBHACHAND vs. COMMISSIONER OF. INCOME TAX, MADRAS

CIVIL APPEAL No. 949/1966Supreme Court[1971] 3 S.C.R. 41529 July 1969Bench: 3 JudgesAuthor: J.C. SHAH, K.S. HEGDE, A.N. GROVER A B9 pages
AI SummaryDismissed

What were the facts?

The assessee, Amarchand Sobhachand, a registered partnership firm, conducted money-lending and businesses in chemical goods and silk yarn. A firm, Bhojaji Sobhachand, had a debit balance of Rs. 268,385/- in its current account with the assessee. For assessment year 1953-54, the assessee claimed this amount as a bad debt. The Income-tax Officer and Appellate Assistant Commissioner disallowed the claim, holding the transactions were accommodations, not related to the assessee's regular business. The Income-tax Appellate Tribunal confirmed this. The assessee appealed to the High Court, which answered a referred question in favour of the revenue. This Supreme Court appeal followed, with the Court remanding the case twice to the Tribunal for better statements of case, as the initial ones were inadequate.

What did the Supreme Court hold?

The Supreme Court held that the findings reached by the Tribunal were findings of fact and were supported by the evidence on record. The Tribunal had specifically found that the sums in question were not loans made in the ordinary course of the assessee's money-lending business, nor in respect of any other business of the assessee. This finding covered the entire amount of Rs. 2,68,385/-. Since this finding of fact was binding on the Supreme Court, the answer to the reframed question had to be in the negative, in favour of the Department. The Court noted that while the Tribunal's discussion of material was not ideal, its findings of fact were supported by evidence. The appeal was dismissed. The Court also reiterated that a Tribunal's statement of case must contain its own findings on facts and evidence, not just a summary of arguments. It also stated that if an assessee has both money-lending and other businesses, a bad debt claim must be considered in relation to both.

What were the issues?

1. 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 of money-lending business of the assessee? (Question of law) 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal erred in disallowing a sum of Rs. 2,68,385/- written off by the assessee in their books of accounts as irrecoverable? (Question of mixed law and fact) Assessee's contentions: The assessee argued that the debt arose from business transactions and should be allowed as a bad debt under Section 10(2)(xi) of the Income-tax Act, 1922. They relied on the fact that there was a flow of money and incidental charges were debited to the Bombay firm. Revenue's contentions: The revenue contended that the transactions were mere accommodations and had no bearing on the assessee's regular business, neither money-lending nor any other business. They relied on the narrations in the entries, the failure to adjust interest, and the assessee's inconsistent explanations.

Which sections of the Income-tax Act were involved?

Section 10(2)(xi),Section 66(1),Section 66(2)

AI-generated summary — verify with the full judgment below

~· A B c 0 E F G AMARCHAND SOBHACHAND v. COMMISSIONER OF. INCOME TAX, MADRAS July 29, 1969, April 7, 1970 & Januarv 21, 1971 [J, C. SHAH, C.J., K. S. HEGDE AND A. N. GROVER, JJ.] 415 Inoo111e-lllx Act. 1922, s. 10(2)(vi), s. 66(1)-Bad debt-May relate 10 nioney [ending business of assessee or olher business--Question referred by tribunal to Higlz Court n111st corer both businesses u·hen the .c/aini can be related to either-Staten1ent of cuse 1nust contain Tribunal's findings on the facts of the case-Must not be 111ere resume of facts and arg111nents.

Supre111e Court Practice-Appeal hy special leai:e against High Court's judg1nent in l11co111e~tax Refere11ce-S11pren1e Court lvi/I not interfere 1''ith finding of /"ct given by Tribunal 011 the evidence recorded in the case.

The appellants were a registered partnership firm engaged in money- Jending business as '.well as business in certain chemical goods and silk yarn.

Another firm had a current account v:ith the appellants between the samvat years 2003 and 2008. At the end of the latter year the said account had a debit balance of Rs. 268385-1-3. In the return of income for the assess- ment year 1953-54 the

The order continues below.

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