LexA. V. THOMAS & CO., LTD., ALLEPPEY versus THE COMMISSIONER OF INCOME-TAX, (BANGALORE) KERALA
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1962 Commirsiontr oj -u:ome~ta:c, Bombay City 1, Bombay v., Afto (P) Ltd., Bombay Shah, J. 1962 Orto!nr, 25. 716 SUPREME COURT REPORTS [1963JSt.ri.>i>. entitled to the rebate claimed by it. The appeal therefore fails and is dismissed with costs. Appeal dismissed. A. V. THOMAS & CO., LTD., ALLEPPEY "· THE COMMISSIONER OF INCOME-TAX, (BANGALORE) KERALA (J. L. KAPUR, 'M. HIDAYATULLA.H and J. c. SHAH, jj.) Income Tax-Deduction-Bad debt-Expenditure-Amount advanced, for purchOJJe of 8hares-Indlan Income-tax Act, 1922 (11of1922), 88. 10(2) (xi) and (xv). The assessee company was incorporated in 1935 and its Memorandum of .M.Ssociation authorised it, inter alia, to promote and to undertake the formation and establishment of other companies and to assist any compo.ny financially or other- wise. There was another company known as the Southern Agencies Ltd. and Mr. A. V. Thomas was director of both these r.ompanies. In 1948 the Southern Agencies Ltd. began the promotion of a company to be known as the Rodier Textile Mills Ltd., with a view to buying up a Mill known as the Rodier Textile Mills. The assessee company made an advance of Rs. 6 lakhs odd to the promoter for the purchase of 6000 shares of the new company. The public took no interest in .the new company and the whole project failed. No application for shares was made on behalf of the assessee company .and no share was acquired. The Southern Agencies Ltd.: however, did not return the entire amount. On December 7, 1951, it paid back only lls. 2 Jakhs which was received in full satisfaction. The balance of Rs. 4,05,071-8-6 was written of!' on December 3i, 1951, which was the close of the year of account of the assessec company. For the assessment year 1952-53 the assessce company claimed a deduction of that amount as a bad debt actually written of!', or alternatively as an expenditure, not of a capital nature laid out or expended wholly and exclusively for the purpose of its business. 1 S.C •. R. SUPREME COURT REPORTS 777 HtU, (I) that the amount advanced for the purchase of shares was of a capital nature and, therefore, the balance ~as not allowable as an expenditure under s. l0(2)(xv) of the Indian Income-tax Act, 1922, as it was not the business of the assessee company to buy agencies and sell them; and in any event the amount was expended in 1948 and not in the year of account ending December 31, 1951. (2) that it was not a bad debt under s. l0(2)(xi). A debt in such cases is an outstanding which is recovered would have swelled the profits. It is not money handed over to some one for purchasing a thing which that person has failed to return even though no purchase was made. Ourtis v. J. &; G. Oltlfiel.d Ltd., (1925) 9 Tax Cas. 319, Arunachalam Ohettiar v. Commissioner of Incomt-tax, (1936) L. R. 63 I. A. 233, Badridas Daga v. Commissioner of Incomt- tn:z, [1959] S. C. R. 690 and Oommmiontr of Income-tax v. Abdull.abhai Abdulakadar, [1961] 2 S.C.R. 9-i9, relied on: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 214 of 1962. Appeal fro~ the judgment dated July 8, 1960 of the Kerala High Court, Emakulam, in Income·tax Referred Case No. 10 of 1957. S. T. Desai and Sardar Bahadur, for the appellant. K. N. Rajagopal Sastry, R. N. Sachthey and P. D. Merwn, for the respondent. 1962. October 25. The Judgment of the Court was delivered by HrnAYATULLAH, J.-The assessec, A.V. Thomas & Co., Ltd., Alleppey, claimed a deduction of Rs. 4,05,07~-8-6 in the assessment year 1952-53 as a bad debt which was written-off in its books of account on December 31, 1951. This claim was disallowed. Afte; sundry proce~ure, the following question was con~idered by the High Court of Kerala and answered agamst the assessee company :- ".Whether on the facts and the circumslanu:s of the cas~ .. the Tr.ibunal ·,, ''" correct in hoiding 1962 A.V. T!wm1U &- C•., Lid. v. Commissionn' of Incmn1-llJJt1 (Bantal8") !Ctra, 1962 A.V. Thomas & Co., Ltd. y, Jommissioner of lncom,,..tax, an.galore) Kera/a ffidayatullah, J. 778 SUPREME COURT REPORTS [1963] SUPP. that the amount of Rs. 4,05,071-8-6 claimed by the assessee Co. as a deduction was not admis- sible either under section 10(2) (xi) or 10(2) (xv) ?" The High Court certified the case as fit for appeal to this Court and this appeal has been filed by the assessee company. The Commissioner of Income- tax (Bangalore) Kerala, is the respondent. The assesse
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