HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Amarchand Sobhachand v. Commissioner of Income-tax, Madras
Civil Appeal No. 949 of 1966
[1971] 3 SCR 415 ·
Indian Income-tax Act, 1922: section 10(2)(xi) · Indian Income-tax Act, 1922: sections 66(1) and 66(2)
Sources & disclosures includedDownload original judgment / order
Three-judge bench; final judgment delivered by K. S. Hegde, J. · J. C. Shah, C.J. · K. S. Hegde, J. · A. N. Grover, J.
Assessment years: 1953-54 (SCR p.417; the final narrative at SCR p.421 instead says 1952-53 while referring to the same Samvat year 2008)
01 · Facts of the case
The assessee firm carried on businesses in drugs, chemicals, mercury, camphor and silk yarn as well as money-lending. It maintained a running account with the related Bombay firm Bhojaji Sobhachand, which became insolvent in April 1952. The assessee wrote off Rs.2,68,385 due at the foot of that account and claimed it as a bad debt. The Income-tax Officer, Appellate Assistant Commissioner and Tribunal rejected the claim, treating the advances as accommodations unconnected with either regular business. On reference, the Madras High Court answered against the assessee (SCR pp.416-418; PDF pp.2-4).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
Section 10(2)(xi) required separate attention to two possible business connections: a loan made in the ordinary course of money-lending, or a debt due in respect of the assessee's other business. Calling an advance an 'accommodation' did not answer either branch. The Court therefore reframed the question and twice required supplementary statements because the Tribunal first omitted adequate analysis and then merely catalogued submissions instead of making factual findings (SCR pp.418-422; PDF pp.4-8). In the second supplementary statement, the Tribunal found that the sums were neither ordinary-course money-lending loans nor advances in respect of any other business. Although the Court criticised the abrupt reasoning, it held that those were supported findings of fact and therefore binding (SCR pp.422-423; PDF pp.8-9).
Source: Primary judgment: discussion
03 · Judicial decision
Bound by the Tribunal's supported factual finding covering the whole amount, the Court answered the reframed question in the negative and in favour of the Department. The appeal was dismissed with no order as to costs (SCR p.423; PDF p.9).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Revenue. The assessee did not obtain the bad-debt deduction because the final factual finding negated a nexus with both its money-lending business and its other business; there was no remand remaining after the final judgment (SCR pp.422-423; PDF pp.8-9).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: for a business bad-debt claim, document the exact commercial nexus at the time each advance arose. If the taxpayer conducts both money-lending and another business, test the transaction under each applicable statutory branch instead of relying on labels such as 'accommodation' or on later insolvency alone. In a reference proceeding, identify whether the challenge is a legal error or an attempt to reopen a supported factual finding.
Source & verification
Download original judgment / order · Open cited source rendition
Exact 9-page source asset read and visually inspected in full. It reports the first remand order, the second remand order and the final judgment together.
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Statutory scope
Historical sections 10(2)(xi) and 66 of the repealed 1922 Act. No automatic equivalence to present bad-debt or reference provisions is asserted.
Later treatment
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