Commissioner of Income Tax vs Santosh Rice Mills

G.G. Sohani, Actg. C.J.

This is an application u/s 256(2) of the Income Tax Act, 1961.

The material facts giving rise to this application briefly, are as follows : The assessee is assessed in the status of a registered firm. For the assessment year 1977-78 for which the accounting year ended on Diwali, 1976, the assessee claimed deduction of a sum of Rs. 45,370 on account of bad debt. The Income Tax Officer rejected that claim. On appeal, the Commissioner of Income Tax (Appeals) upheld the finding of the Income Tax Officer in that behalf. On further appeal before the Tribunal, the Tribunal upheld the claim of the assessee and allowed that appeal. Aggrieved by the order passed by the Tribunal, the Revenue sought reference, but as that application was rejected, the Revenue has filed this application.

Having heard learned counsel for the parties, we have come to the conclusion that the following question of law does arise out of the order passed by the Tribunal:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing the assessee''s claim for deduction of Rs. 45,370, as bad debt?"

The application is, therefore, allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this court for its opinion. In the circumstances of the case, parties shall bear their own costs of this reference.