Commissioner Of Income-Tax, Calcutta v. Birla Bros. (P) Ltd

COMi\USSIONER OF INCOME-TAX, CALCUTTA BIRLA BROS. (P) LTD. April 23, 1970 [J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] Jiulian lnmmNux Acr. 1922, s. 10(2)(xi)-A.r.\'C.Vste company ct Mannginf.f Age1H-Selling agent of conJpany 11u1nagecl by as.\·essee taki11/.f /oc11t' fron1 ti ht111k e1nd tlSSt!l'St!e .\·tc111ding guarantee for tlrt loan-Loan not. re~paid hy ,seJ/i11f.f agent hut hy ll.\·:,.essee ar ft(Uc11·antor-Asse.\·see failing /(} recorer loan fro111 selling agent-loan aniount c/airned as a ht1d th'ht-Ad111i.l',\'ihilily of clai111. The asses.cc was a Private Limited Company. It carried on the busi-nc;s of banking and financing as also of managing agency. Starch Pro· ducts Lt<l., was one of various companies. which was being managed by the assessce. Starch Products had appointed the U.P. Sales Corporation Ltd., as its selling agent. The assessee claimed to ·have stood guarantee for a loan of Rs. 6 lacs which was advanced to U.P. Sales Corporation Ltd., by the Gwalior Industrial Bank. The borrower failed to pay the loan which on August 2, 1948 stood at Rs. 5,60,199. This amount was ipaid by the asscssec pursuant to the guarantee. Thereafter the assessec treated the U .P. Sales Corporfttion as ils debtor for the aforesaid amount. That company \vent into liquidation and as the assessee could not recover anything from it. a sum of Rs. 5,60.199 was written off in the books of the assessee company. Before the Income-tax Office·r the said amount was claimed as a bad debt under s. 10(2) (xi) o·f the Income-tax Act, 1922. The Income-tax Officer rejected the claim. The assessee's appeal; before the Assistant Commissioner failed. The Appellate Tribunal, nowever, held that the guarantee given by the assessee was of indirect oenefit to the assessee's husincss because if it had not guaranteed the h1an fri ques .. lion the company managed by it would have had to give extended credit to its selling agent which it could not have done without borrowing money either from the assessee or some third party. In reference, the High Court also held that the guarantee was in tho larger interest of the ~1ssessee's business. The Commissioner of Income-tax appealed to this Court by special leave. HELD: (i) While computing profits or· gains of business under s. W certain allowances have to be made under sub-s. (2). The allowance covered by cl. (xi) thereof has to be made, when the assessce's accounts in respect of any part o'f his business, profession or vocation are not" kept on a cash basis, of such sum, in respect of the bad and doubtful debts, due to the assessce in respect of that part of his business profession and voca-tion. and in the case of an assessee c.arrying on a banking or money lending busmess o'f such sum in respect loans made in the ordinary course of such business as the Income-tax Officer may estimate to be irrecoverable but not exceeding the amount actually written •off as irrecoverable in the books of the asseS!jee. A bad d_ebt mea~s a debt ~hich would have gone in :o the llalance-shcet as. a tradmg debt m the busmess or trade. It must arise in the course of .and as a result of the assessee's business. The deduction• claimed should not be too remote frpm the business carried on by the ru;~cssee. [361 B-E] · - Ll2 Sup. C 1/70-9 MART AZIM, FATAT fatat sa (stgdz) fafaze [The Commissioner of Income-tax, Calcutta Birla Bros. (P) Ltd.](23 "sta, 1970) (Flo So Ato MY, Ho. Geo FTF se To UA waz) .efrsaa germ tea az, 1922(1922 et 14) —aret—19(2) (xi)—fratieat seat ar aft sie fradtes aca saru-atarat e eh ar Hun—faetfed ar safes sect &fara-nfarat gre feet a & aco at fe arar sitke rath", €R Fa eo at serafa afar afieatart a a atsfadara a faq at & qfenaaey serafan ® eq Afratfedt grt set sfadara fear. sm—fraffedt an fareFEMafamat& St aN ager TA A aaa tea faaife asmait BY[faferercerat] SI ETHdim TA afe ag TA fratiedt SA a& arar arcar Feat B sat ahora whe —dar yaw araaferrearaey saya gat A—sa aM a de aT afesia @ wtBATT AT aT Hearts aM S eH yeaa F fearwat g—faatie art wear ma aa erat & aarmsawatferat ar aeace free at stat atfec. art a a at fraifedt sete fafads aoa at 1 aeefnn ate fradteot aaTHy-APAHLT FT HVAT Ferdt Ht)ery srevea fafaes aH safaat 1 & vn delt Heat A faa caer fratfet HITT AAT APcaiq stsaza fafats Fat A Jo Mo AeA awrad fakes at avdGamafanat % eH fagaa Prat ar| fratfedt + ag arat faar fmsax 6 are waa H Fem aT eT A A fas enfaae gvetkgra at¥ qo ito aa areata fro BY See feat ar| SANT AA ae FATaq Gata vat PRAT ST fs 2 aR, 1948 aT 560,199 VAT aT | feetfet+ garyfe Barge F sa A TT daraHt fagr i sas arecrate | qatar THR F faq gat gaa ea areata feto HIaay aut & STA maT| Hoe TATA Bt TE ate a fe fautfatgan gu vt aga aa HT aT, ZAFAT 5,60,199 waa at fe fratheetaut & ad-edt aafafa Ht at TE | ATTA afar & aA Aeerat frat vat fe ae WH eeHA Zae Cae, 1922 a ATT 10(2) (xi)a afta sar eT Sy aaa afar[a][ Ga][ aa][ al][ aediea][ BX][ fear][ |]sa fratfedt X agrH wa F AAAadia niga at, at agana wat fag attr afar 7 ag afafratfea frat fr fratfedt +A gearyfa at at, Fae raifdl F HIATT HT IIe STA HATqgaat or, waif afe Sar seATAT AEM a searafa a atae, at sataru sated aro at aot faaaafrrat se) SeIT aT TET af, faeae at at faatfedt a ar feet chat gaan[&][ sex][ Sat][ gt][ feat]gmat at fader HRA Te TRA TTA A A AG afafaatfea fear fesearafa fratfedt B Breare FATT, fer Hat wea assagar A ee Fria % fare fra gorse Sat ga rare F aglaGreaHY 1 aiter Gift BMT BU, afafraifed— at 10 F aela FIRATC & aral at afaarat atanor HU AAT HIE BraTA (2) F atta VA siewafer fratfedtmica, afar ar maarRa aT ataa TAHT AA AHA ATAMTT FXaét tal STAT @, TT SAF ave(xi)® aeata at ae ate sa ST aTafery aqui & arafeaa Get uf ar alt, TH fs faathtdl & Fr<arz,afer at arrsaa wre A ataT saaT Ba eT IC HI RA FraThetoy car % aft fir 0 arent Farrell agar F faq weeT a AaRet afar ar afar ar aTgaTA FATT AAT WT BT, ATAH afaare> aiear H aagelea, fag at fF va cay & afte 7 at a , fraifedd & agl-erat F aagela uf Here sega: afafafead at7. gt) aa sa ET A Var a afasa sf at fe area aT areHFahr eT ae aa FT Geaga F fearwar ati sa faaifedt &BTU H HAHA Hat saw ofenmcaed saya Pat aferi frametal & art Haar fear war ar, sah at fasifedl are savTE HIATT H Sha FU al Seat afer 1 wer 10(2) (xi) ¥ aatearaaa fac ter am dar afee fae saa eo a ante aTmata te rare ar ae Hat ae fora aTat at ATTA Bt FT <eT| iaraaa he aT A ateFear a at cat caer FS afHey are amaararedt HUTTA A AT gt IAA Var Hgstay atye a faah arr ae ser at ama fe aH ara faraafrnatat at fac me ver al searyfa sae-afarer|HF BITE F7aaa Ha we ft1 (dcr 5) In the present case, neither the memorandum· of ~sociarion nor the managing ·agency agreement. contained any such provisions hy which it could be said that he guarantee of the loan made by the ba.nk to the sell-ing agents was. done in the course of the managing agency business. There Was no privity of contract or any Jegal relationship between the assessee and the selling agent. Neither under custom nor under any · statutory provision. or any contractual obligation \vas the assessee bo•1nd to guarantee the loan advanced by the bank to the selling agent. The gua-rantee could not . be said to he indirectly in the interest of the assessee's bu$iness, or as held by the High Court, in its larger interest. The Tribunal and the High Court were, therefore, in error in holding that the .sum in question was allowable as a. deduction under s. 10(2)(xi). [362 D-E, F-H] Ma_dan G_opa/ Bag/a v. Commissioner of Income-tax, Wesl Bengal, 30 I.T.R. 174 and Commissioner of· Income-tax, Bombay v. A bd11/labhai . Abdulkadar, 31 l.T.R. 72, applied. 'Essen Private Ltd. v. Commissioner of Income-tax, 65 I.T.R. 625, dis-tinguished. CIVIL APPELLATE J\JRISDI0T!ON: Civil Appeals Nos. 2380 and 2381 of 1966. Appeals from the .iudgment and order dated January 7. 1966 (Jf the Calcutta High Court in Income-tax References Nos. 7 and 176 of 1961. S. Mitra, S. K. Aiyar, R. N. Sachthey and B. D. Sharma, for the appellant (\n both the appeals) . A. K. Sen, 0. P. Khaitan and B. P. Maheshwari. for the res-pondent (in both the appeals). · The Judgment of th.~ Court was delivered "1 Grover, J. These appeals by certificate arise out of a common judgment of the Calcutta High Court in two Income tax References. The assessee is a private limited company. It carried on the busim.ess of banking and financing as also of managing agency. Starch Products Ltd. was one of the various companies which was being managed by the assessee. Starch Products had appointed the U.P. Sales Corporation Ltd. as its selling agent. The assessee claimed to have stood guarantee for a Joan of Rs. 6 Jakhs which was advanced to the U.P. S>Jles Corporntion Ltd. by the Gwalior Industrial Bank Ltd. The borrower failed to pay the loan which Qn August 2:1948 stood at Rs. 5,60, 199. This amount was paid by the assessee pursuant to the guarantee. Thereafter the assessee treated the U.P. Sales Corporation Ltd. as its debtor for the afore· i;aid amount. That company went il).to liquidation and as the assessee could not recover anything from it a sum of Rs. 5,60.199 was written off in the books of the assessee company.. The claim was not entertained either by the Income tax Officer or the Appel-late Assistant Commissioner. Before the Income tax Officer the faaifedt & att faaa-afaaal F ataafaar favreargvtaraeq atfafra dae ad aria at we & aete, atta atfeetaradt saat at fret dfaarcaa afieat B aefta,fratfedt ae arefraa-afanat at fac me semat mearafa 2afae arae ari agara aa A wet aT cat at fH fea cart & frathedl & arearz F ipa—Hag seargftdt we ah agate eer a fa at ate art ataaél ot fe safer aro fasa-afaaat ar frat aw & azar| feet ge cerare ater farsa afraeat at fag me fret ae St oearytaaye fadlfafan afr ae asta ati agateaam a adt arwis fe farenfiaat a fer a aor at weary F arefaaifedt @ areare at FartHamma STa fat ware a gfaarsqret stat aTtate afrae at at Aa at, ag atecfas fates featal Ta ate a Tad ST A TTT TT at arefea ar Tes PUTTa at adt weit at atfaa ate at ocr Het ar ara fear wat aT,ag are10(2) (xi) a ofefe Fae aa arateafafraa.atare 10(2) (xi) & afta feet at ate ar aa ees fat aAare atfaer et 1g at ate a A areca Flat ara HoT aaa eetara aT| (TAT 6).. rararieratt at x ada aaacaa ot dat feel H eeaa Fea aay F fia B fares sHTTTHT GET FT TE EI. ap at ,2. fraifedt siete frafaa-aet21 ae afar att faattanar Tar sara apaaT Bae wat staa stsaca fafaesfafacr eafaat Fa cH aol ft fearsara fratfedt are fear orwer 21 ae sisaea fafats A oot faerie & BTA Tat reedea areata fafaze at faa far ari fraifedt & ag arar fear PRsay 6 are eat ee H far WY Tae wea Aea Hreattard feo ayvarfaat gusfeeat am faface % gare feat ar, venngfs st at 1 genxay ara va “ae ar aaa BTAA game El Tf 2 area, 1948at 5,60,199 wat at.faraifedt A ea carat dart geanyfeaga + fear) sae aa fratfedt a cat sea Aer Trafafats ay gates cam & faq aaa aoe ETA ATT| Ta BIT aTTara st wat ate ahe faaifedd sas we A HA TGA aal BT TATgafae 5,60,199 saa at ute fraifedt aodt & adl-ardt F anfafadweTEL Gas aa aT a a ras afears 4 ate a Bt agITH aTTH(ait) 3 fiat fararaax afaare B at TH HAH aT Aag ara fear mar fe aa sar gat wTRe aera A fratfadt Sardte 12 faaraz,1957 art Ta Bl Afau| fraifedl F at ag eaectacTfear ar fe saat sat ast wan fret Cet Sot at fret facia feafafaega & adinnra aél ft, sax dot,va arrat afsara ameatare at feat) Gas HaAATe, TT THA Gare at TE a, ayaquifas angered fafaara ad attare FH aawe meat aferaTeBana ag afar ae al wifes Ht TE fH TAC Mea aoa MUTNATfatute & a araeht at Farad Fafa asters da fafeesa afagia at 7 ot ate oa fas Taal AT 8 seh BT AT AAT HA AACHAAT SS At VHA HT Tara far wari areas afsHraA F AATTATfavifedt & ag wer aa fe ag ga aaa F aren da at fa searaiadat, fag ga att sanraaraa al gar fe freer a argtar aaeq afta fear ar faas are seargfa et aeaeedl ara orfsHTat wat at ate ag fie are det aceasta foes senyta areata eff,sfaa eo & carey aah ware wat or ar ag fe se Meare aT ahaaaia ® fara gat aes alae ar agen aa(attr) &ana, Tt FET aT HTT wat at, ae ae aT fH mraHt aftareT Re St ET a arafera a FE 5,60,199 Mra aT THA AT, ara at 2014Seasaree facia ofa = [1974] 3 THO Fito qo raat & Tage BT fear ar 1 aerrH aTaM (MT)sa Tet Tx rare'fearat fe aa saaaa HH em eae Vaz, 1922 H MT 10(2)(ii) Sareea waste wera ar ale atsaat waFH agate fratB areart & fee F ate arfinfsan aetstrar ¥ atx oz feu ae ao atrearyfa sat Car sere at atfe Prathedt & areare B® garatearaqen4H fewra art tet war att seed ot aadtat afeag tat sadt at ct ag att faaar sae fratfedt, vafirr wort atgot al vearafa art aaedt afaaraa afr & aeta ail1 sasMATTRTR aayetler ere fry feat war ara aa at met ser ahsfraifadt ag arfaa ae andl fe ag aco tar gare at fra at arefaretat ¢ Ale ot fa mg * aged Brat F area F fear Tarat, freg fratfadt areaag adt ara fe ag acm 8a agearaHl aelaar HUT FH. fore fear war ar fas eqrarfes araey safira-aafaat FA wR HH ATTATa: Va aay Held? F wgFHarate sel fat at aHAr AT| 3. ater afaarn a age aad (atte) & ga fang &aenfa ema adt at fe WM afl gf of, ag faatfed& arcane atsaa: aisha at at afar at aaa mea A a ara He[at,]AE A TAIT| said amount was claimed as bad debt vide assessee's letter dated September 12, 1957. The Income tax Officer rejected the expla-nation tuniished by the assessee for advancing such a large amount to a ~ompai1y whose financial position was far from satisfactory. According to him the advance was not a bona fide money lendilllg investment. Subsequently it was sought to be established before the 8 Income tax Officer, that an indemnity had been given to the Gwalior Industrial Bank Ltd. in the matter of the loan account of the 0.P. Sales Corporation Ltd. and the payment had been made on its failure to clear the debt of the Bank. According to the In-come tax Officer the assessee \vas asked to produce evidence about the guarantee having been furnished but he was not satisfied that. · there was any directors' resolution authorising the furnishing of a guarantee or that the document purporting to be a guarantee had been properly stamped or that there was other sufficient evidence to establish the transaction. Before t• Appellate Assistant Com-missioner the only substal)tial ground· taken was that the Income tax Officer had wrongly disallowed the claim for bad debt amount-ing to Rs. 5,60,199. The Appellate Assistant Commissioner con~ D sidered the question of the aforesaid amount being an admissible deduction or a~lowance under s. 10(2) (xi) of the Income tax Act 1922. In his opinion the guaranteeing· of irlo3lll though made in the interest of the assessee's business and as a matter of commercial expediency did not represent an advance made_ in the normal course of the assess~'s business. Such an ad¥11nce could have E been made only if it had been. made to the company managed by the assessee under a contractu~l obligation to guarantee the finan-ces of the managed company. According to him the· claim for irrecoverable loan would have been also admissible if the assessee could establish that the loan represented an int~est bearing ad-vance made m the course of the assessee's money lending business F but that was not the case of the assessee. And since the loan had been advanced to assist a concern having trade relations with one of the managed companies it could not be ·allowed as a permissible deduction. The appellate tribunal did not agree with the finding of the Appellate Assistant Commissioner that the 1oss was not directly G incidental to the assessee's business. This is what the tribunal stated in itS ord$r : "The Appellate Assistant Commissioner, in our Qpi-nion, failed to appreciate the special nature of the busi-ness carried on by the assessee. This is not a case where H any money was advanced by the asse'ssee for the pu{pcse of earning 'interest. All that the assessee did was to stand surety for the money advanced by a Bank to the selling agent of one of its manased companies. If such a eeare wa F agian aaa (ater)fraifedt ar aaaST are BLATTaT feria safe HtaaaH oH WaT|Aetar ataar agt ¢ fear facifedt a cara sofa Hwa FB yar.& fac me aa sare fear arifasifidta wy ara at ft,ag ae a fe ag va aa & fare ofaya gs of, faa aea aotsaferd aafrat Ha cH artFH faaa-afenatat sare fearat afe vat margfa vat ek ord, a aat werd sreqa—sferfats aver ot fe saftara-aafrat Fa oT a, faw-afanaiat WT eat GSAT Hag araawit aaa sl andial, afsafert ofaaat at adie werare safea-aadl. ar fad-dieoPT | Safera-aet are ge ware B sat FA FY oaerwar aFat& fore et fraifedht sat F se ae at mearafa Saft, fare . arfaae wefecaa ae fafaes 1 FAT yar ara BTU fetoat fear at| SUX AA ATA BAI VAT Sea fara sretaafro AT AT AAA aM gs Ha Hes aagaa F aTdt faaifedt weargfaarat & wyaaa areata | aa: sare feeqe frat at ae oe Ie aa STs HAA BT TAT et AMT ATreaifedt arzare Hearn fear F st searyfa at we eft1 Taraaad, cafaa saat & faa area S fre ate gua F saa SA arilatt e fae stryfs & wee as saat ava, fraifed F arearya arakea ot ag ara wa afeat etal ee sa at Oe utaSY fae arreaRTaAT H BTL TAT ATAgh TAA AT FT HATqgara & fag, 7 at 72 gh, atom asl 8 ag arintsan aaATT TT ATBTA HY TAA: Glaarqasy aad at efee a& we a, aIare F ara ake afwaral Bl TMA Het F asia:_ wetat a aaadt F 0- afraetFag afafraifca fear fe 5,600,199 waa at gfe % fagcaaitcdttat atar Para, ag wa HetdtFl AraHr slaw aTgiiar oz afar fats ara freafafadseq sea araray aTfifase frat:. cay Aaa Haat ® araT< ITT AIT saat ofefeafaat F.5,60,199 waa at utafanifedt F arat F aralaBl ATTAT©Sawa Fare wetdt at?” afafian a arr 66 (7) & aia sega aaad F AAT TBs cararaa at dia aa gen fafese fac TOT) BHT Fala eataaraean & aif areatan afaare TISAT TAT IT at FfeRT E| 4, sea vapmaa X ga sea 7x fran fear fe war frarana THAafafara at art 10 (2) (xi)at afefr & Ata ard[%]1 aaahaaaa (attr) & a frome & ara 3 fe Ga Ht aaa F searyfeAy ve ft, BE wt frare wet 2 1 fet falafewa aera ote aA & fro& gers TAT BT gata Aa H are Seq TTAA ST aeyaa feat A, Ag Aes -—“em ga wa a aena& fa faatfedt & areare F aresfetafafaaa H searyfaat weat ate gard ua ag a fe ae ao at aa 10(2) (xi)& aataia favifedt & asrearzar argatas at ate C8 am H are Hag arar feat wat ar fea 31 HAGA, 1951 BT era BM TMA 18 Aagax,1952 aTATA Slt Ae FATT Aar-ag FH eager sv” 5. aret 10 & wet arcane & aval ar afaaral Ft arora Hwaaa ArH STITT (2) s aes aa aitwaefaaifedtFB area,afa ar erqara & feet art at araa sear Mer aH avery eaeTa STATS, A Gat GS (xi) F Heats ara ara atssa ss gKafar reat & arafera ufe ar ater, ifs fratfedt & ares, afaWT aaas Fah WIA HT TAT TaHy 2q al, ATT HH, Ta faaifedd a|ware oT far WS rary F age ape A fac aw ant & arafeadell crf ar afar ar aga Hr<Ae AAT VI Al, araHre afrard Fainat 4 aagela freq a fa sa cea a afen a et a fratfedd &ad-arat % saqeita ufs & wa Ht sega: afafafas at.ag at1 aa gaema tar war afasa@ A fe ereare aT aaaH carafe eHaraegq T gears A fara war et1 sa faaifedt & areanx F agarH att gat ofenaeaeg saya gar afer1 faa sete F art F atarfart wat ar, sat att frerifedt ara were ae aTeNt ® aie att-aval att afer1 wea Mere atte sara ATRL Maa, TAA Tareeam aaa & cit faarea edtere frat ar, ag ag at fe are 10(2) (xi)e aerate art F fax tar aor gat aifee faa vfaa wa & eqrarteawen ate US eaTITT BT ae Har ae fas arat et TTA st aTwl a1 ae Aa saa fear war fe va maa A M fathead ar, agvar eafadt vet at at fe aer onfeaat & far sfay set A as seBI FIAT WaT aT, 7 al ae agar gt atag Fae TAT FTaaaatammt attat feel atrAT. ee THT oafar By AT at aged ares sryfaalae aT hares fH GaN TATe aTASITTBRA ST HTT F fae aa fasta feat a, feeq ag atfaa aet guarnntee was not given Messrs. Starch Products Ltd .. one of the managed companies, would have had to give extended credit to the selling agent and this could be possible if the managed company'in its turn was financed either by the managing agents or a third party. It was to obviate the necessity of such borrowi·ng by the manag-ed company that the assessee company stood guarantee for the loan given by Gwalior Industrial Bank Ltd. to U.P. Sales Corporation Ltd. It was only on the failure on the part of the borrower, i.e. U.P. Sales Corporation Ltd., to fulfil its committment that the assessee as a gua-rantor came into the picture. There was. therefore, no question of earning of any interest on any money advanced. It was in the. larger interest of the assessee"s business that the guarantee was given. The standing of surety for the sales cf'ga.nisation of the managed com-pany and the consequent loss arising therefrom was in our opinion germane to the assessee's business. It is now well-established that a sum of money extended not of necessity and with a view to give a direct and imme-diate benefit to the trade but voluntarily and on the ground of commercial expediency and in order to indi-rectly facilitate the carrying on of the business, may yet be an allowable deduction in computing the profits and gains of the business." foe Tribunal held that the assessee's claim for the loss of Rs. 5 60 199 was an admissible deduction. At the instance o.f the Com'missioner of Income tax, the Tribunal referred the following question of law to the High Court :- "Whether on the facts and in the circumstances of the case, the sum of Rs. 5,60, I 99 was an admissible de-duction in computing the business profits of the asses-see ?'' Three other questions were referred to the High Court on an application made under s. 66 ( 2) of the Act. It is unnecessary to refer to them as the real controversy has centred on the above question alone. The High Court address.ed itse1f to the question whether the amount in dispute fell within s. I 0 ( 2) (xi) of the Act. The finding of the Appellate Assista.nt Commissioner that the guarantee had in fact been furnished to the Bank was not disputed. This is what the High Court said after referring to certain decided cases and the relevant portion of the Tribunal's judgment :- "We agree that it was in the larger interest of the assessee's business that the guarantee was given and we are of the opinion that the debt was incidental to the business of the assessee within the meaning o! s. 10(2)-( xi) of the Act and such a debt was found to be irre-coverable in the relevant accounting year commencing on the 3 lst October 1951 and ending on the 18th October 1952."' feat war fe wea ntact & saat ate Geefar wT saHM F TTT FT BAH AAAI sa ey aafsaat F fratsofty se eqHas gt Ht saat aad at| ate Var arava gar, a at gateafeae wae¥ far sare far ae eTHT aay HM F BT yore asaft saat q sire etfs stat, + fe wreare araeet arfat| feet earardyal, ATT a BTeae H far qa orca HLA F fae, wy asr Alar weaKa Bl BTS al Vat Sle at aadt & faa arco us tat cafsafeaca Hat Pras afer & aaa A arate F sat H fas ga oq;PtaHa &| ate ga ofry B aT ar Sata Hear[%,] ait afe ta MEefe arta at art &, at ae Breare araedit seo Mla tafe faaifeda acer a adi, afen ga fafa erfaca at otaa we F fae darefrat@,oft fe cad areare & saya gar &, at ae ara 10(2) (xi)Salt St ATH BT A se wHH aT Held HWA BT BRArt AT;AST MAT YasFATTWsZeaTAsWeyeTHIEt! aat ANATefar | waa argae fafats sar aerate aaa ART? ae ATA FHadtardt ate agerat & sace-afemat Feo FH areare aaa awas gre safest weafrat Fa cH egal H arr gU HUT H AGAHat safia-aedt at areata sare feat ate ga eodt atdae 82° ere VTS BT ST ET TTT Za aT, Gaal carafe wt at1 gafere-eT TIT HAT A aawe wt ak ga fe Fe A Gara H fae araStat,at ada F acd searyfa & agert va de at HS azTfrat1 fratfedt a aaa: aot edad A ge wey ee TR wT Aafafeltad weit cet at ate gaat are ie (1) (xi)Saha ae ararar fear at| afin A ag fond faareatfesoafiae att aSatHF ate ge A as can aie safera-weadt wy sem at mearyfaaa gt fee ae Huy, dat A saat afiqaaralF agra F atewah ware F ager F fer aes, ate ara Age we frat TAT|za arma § va fafaeaa at afagite oer Home atge mAe aamy & agaFH ter ave atae or faas arer faatfeadt aa sare BF 1 31 ange do arto 72. 2 65 arfodo ato 625. > fac aa afar & ora at carats BX ar aware ar) sat THT GFgaca afaaen araedt wae F wafera wert AY gare BA gat afraq axe atawa ave alae or) ata aftaco § ag faveCantar fe ag wafaa wecdlBTge at omaer Hea H fry Taeafaeen HT MIT aT | adaa aaa H ga aeal FA NS A. aeq atgra me Sat aT ATA H aT H ATTsary afaae ataeit SUTHA dar ag stata sto ar fay are 3 Hel AT AAT fs dy gTetSaar afeaatell at far ae ae aT mearafr rarer atfeaeoT A aTTATE& agar A dt ve aT|So, ear wa i arta afer gar sea areas sat A et faaeat ar aera fat &, 3 arer 10/2) (xi) ¥ wets sat fee wT aT> faa gata adieae sera fear or amar g fF faraifedt FTaar sat saat aH aifara ar are Va frat wh ser sass BT ATTagi frat wat ar fara afte 0a ate ar arar feat aTAeA aT|fraifedt & atx fara afanat Be dra dfaer fore arg at aravaot are wh fafa aaa adi aria dete e ata atta a fratara sade at fret afaarea afer & aia, ap are fraafanat at fac ae veo at cearafa 2A % fre fraifedt ares aT aeara aa Wael ar tal 8 fe fre sax & faatfedt B arcane F featag seargfa ator Htag afer wetfae a aE eA ATTwat ot fe safe woat fart afaaat ar fradtom Het F AAT farettgat qerart arr fara afenat at fer we fret acer at qearyta St> Graft fafen afiea B adta dtag art aa A at aT El[S][ fF]fazer afinarat at fae ae aco at meargta B are Fratfedt F HrTATeat wart H ayerer BT a fea ware & afaar ores Stet st 1 Te THT> geq warmer ® et fare at aT aaa aferg fe faite aareart & area fer F dag serrata at TE oTata afew FToy ma at, ag gaTataH areata fafirs feafa a ga ave B aadua aaa oe at orarfea ary See eaaTeT Ay ay ash watt aT at|Fora ate BY area wey ar arar PRAT. WaT aT, aE AAT 10(2) (xi) FFafeht & vtazadl rar21 afafaam atcarer10(2((xi) F aeff at dye ar grape % far a at avg athe a TEM ATA&t areata H Var sar HwaT aTaarasH Mt At AHA AT | o7. Stat HUT Se faface cee HT ART SAT THTUCAH TATfralfedt % free dat afer| ge care & ait ae ated arfatareat g ate Toa caraH fora wt aged fear ara Fl UH qAAyat Ste ATT at aT TI Wier Vie Br TS 1 at]o While computing profits or gains of business under s. 10 cer-t;1in allowances have to be made under sub-s. ( 2). The allowance covered by clause (xi) thereof has to be made when the assessee's accounts in respect of any part of his business, profession or voca· tion are not kept on the cash basis, of such sum, in respect of bad and doubtful debts, due to the assessee in respect a! that part of c his business. profession or vocation, and in the_ case of an assessee carrying on a banking .or money,lending business of such sum in respect of loans made in the ordinary course of such business as the Income tax Officer may estimate to be irrecoverable but not exceeding the amount actually written off as irrecoverable in the books of the assessee. Now a bad debt means (l debt which would D have gone into the balance sheet as a trading debt in the busi,ness or trade. It must arise in the course of and as a result of the assessee's business. The deduction claimed should not be too re-mote frmn the business carried on by the assessee. In Madan Gopal Bag/a v. Ccm1r.i1Sioner of lnc'Qme tax West Bengal(') the princi-ple which was accepted was that the debt in·order to fall within s. 10(2)(xi) must be ,one whi~h can properly be called a trading E debt i.e. debt of the trade the ptofits of which are being computed. It was observed that the assessee in that case was not a person carrying on business of standing' surety for other persons nor was he a money-lender. He was simply a timber merchant. There was some evidence that he had from time to t'.me obtained finances for his business by procuring loans on the joint security of himself and F some other person. But it was not established that he was in the habit of standing surety for other persons along with them for the purpose of securing loans for their use and benefit. Even if such had been the case any loss suffered by reason of having to pay a debt borrowed for the benefit .of another would have been a capi-tal loss to him and not a business loss at all. A businessman may have to stand surety for some one in order to get monies for his own business. There may be a custom of the business by which that may be the only method whereby he could get money for the purpm.~ of his own business. If he is to discharge a surety debt and if any su~h custom