Judgment:
S.H. Kapadia, J.
1. This appeal was on the Board on March 31, 2001, when the following order was passed :
'For reasons to be given subsequently appeal dismissed.'
2. We now propose to give reasons :
The main question which arises for determination in this appeal is as follows :
'Whether, in the facts and circumstances of the case, an amount which is not allowed to be written off as bad debt could be claimed as a business loss ?'
3. Facts :
In this appeal, we are concerned with the assessment year 1984-85. The last day of the accounting year was June 30, 1983. On that day, Greaves International Ltd. entered into an agreement with its sister concern, Greaves Cotton Ltd. Under the said agreement, Greaves International Ltd., assigned doubtful debts of Rs. 68,70,943.27 for a price of Rs. 21,33,987 to Greaves Cotton Ltd.--appellant herein. The amount of Rs. 21,33,987 was the recoverable amount out of the total doubtful debts of Rs. 68,70,943.27. This was as per surveyor's report also dated June 30, 1983. On July 1, 1983, Greaves International Ltd. got merged into Greaves Cotton Ltd., the appellant herein. The assessee-Greaves International Ltd. claimed deduction in respect of the bad debts which, according to the surveyor's report, were not recoverable. This has been disallowed by all the authorities. The claim was also disallowed by the Tribunal. However, in the alternative, for the first time, before the Tribunal, the said assessee submitted that if the debts, as claimed by the assessee, cannot be written off as bad debts, they should be allowed as a trading loss. This alternate plea was raised for the first time only before the Tribunal. Finally, both the pleas were rejected by the Tribunal. Hence, the assessee has come in appeal under Section 260A to this court.
4. Findings :
The only argument advanced before us on behalf of the assessee was based on the alternate plea referred to above. It was contended that the Tribunal had permitted the assessee to raise the said plea. It was contended that the burden to prove the trading loss was on the assessee. How-ever, it was contended that the tribunal erred in calling upon the assessee to prove in that regard that the debt had become a bad debt. It was contended that where the assessee claims deduction of an amount as a trading loss, it was not necessary for the assessee to prove that the amount has become a bad debt. It was contended that these are two independent concepts. We do not find any merit in this appeal. We would like to confine our judgment to the facts of this case. In this matter, the assessee claimed before the Assessing Officer as also before the Commissioner of Income-tax (Appeals) that the write-offs were in respect of bad debt. This was disallowed on the ground that on June 30, 1983, there was a sale of the debts amounting to Rs. 68,70,943.27 for Rs. 21,33,987. Therefore, the Commissioner of Income-tax (Appeals) rightly held that the said write-offs were not of bad debts but of loss on sale of the assessee's rights in the shape of debts/advances. The assessee had called for the report of their own surveyor. The report was submitted on June 30, 1983. The deed of assignment was executed on June 30, 1983, and the assessee-company got merged into the appellant-company on the next day. We do not have the basis of the surveyor's report. In view of the facts and circumstances of the present case, there was no trading loss. It was a sale of the assessee's rights. There is no basis to show as to how the aforestated loans and advances constituted trading loss. The assessee was a trader. It appears that the assessee was a trader in goods. There is nothing to indicate that the assessee used to lend monies in the course of its business. Therefore, in this case, there is want of data. Without the factual basis, we are not in a position to answer the above question. The Tribunal has rightly held that the assessee has failed to prove that the amounts represented trading loss. Further, the business was sold on the very next day. If that is the case, then one fails to understand as to how the aforestated amount represented a trading loss. In the case of JOSNA Bank Ltd. v. CIT : [1974]97ITR72(Ker) , the assessee, Josna Bank was given the benefit of moratorium by the Central Government. A scheme for amalgamation was sanctioned by the Government under the Banking Regulation Act. Under the scheme, Josna Bank Ltd. was taken over by another bank. Under the scheme, valuation of the investments of Josna Bank were required to be made at market value prevailing on the prescribed date. The difference between the book value of the investments and the market value was found to be Rs. 55,544.05. Josna Bank-assessee claimed that the said amount should be added to its loss. The claim was rejected. The appeal was allowed by the Kerala High Court which came to the conclusion that a substantial portion of the assets of the assessee-bank were held in securities and the business of banking included dealings in such securities. That the transactions carried out by Josna Bank were in the course of its business. That the sale of securities and shares by Josna Bank was in the course of its business and, therefore,the loss suffered by it in the matter of sale of its securities to Krishna Bank Ltd. was a trading loss. In the present case, the assessee was a trader in goods. There is no evidence to show that lending of monies was a part of their business. Hence, the judgment in Josna Bank Ltd. v. CIT : [1974]97ITR72(Ker) , has no application. As stated above, this was not even the plea of the assessee before the Assessing Officer. It was not even pleaded before the Commissioner of Income-tax (Appeals). The plea regarding trading loss was taken only before the Tribunal and that too in the alternative. Similarly, in the case of CIT v. Pathinen Grama Arya Vysya Bank Ltd. : [1977]109ITR788(Mad) , the assessee-bank transferred its banking business to Vysya Bank under a series of agreements which provided for the valuation of various items of assets and liabilities to be taken over by the Vysya Bank. One of the assets in question was the Government security. The book value of which was Rs. 10.43 lakhs while the market value was Rs. 10.33 lakhs. The securities were taken over at market value which was less than the cost by about Rs. 16,000. The assessee claimed deduction for this loss. This was rejected by the Assessing Officer and by the Appellate Assistant Commissioner. It was allowed by the Tribunal. The Department came by way of reference to the High Court. The High Court took the view, on facts, that there was a sale of a particular item of assets. That it was not a slump sale. In the present case, we do not know the basis on which Greaves International Ltd. got merged into the appellant. In the case reported in CIT v. Pathinen Grama Arya Vysya Bank Ltd. : [1977]109ITR788(Mad) , it has been held that the question whether the sale was a realisation sale or whether it was a sale in the course of a business would depend on the facts of each case. That, if the sale was only a winding' up sale to close down the business and to realise all the assets then such a sale would constitute a realisation sale and the amount received by the transferor was not liable to be taxed. However, in cases where there was a sale of a particular item of assets for a stated consideration, the loss was allowable as a deduction. As stated above, all the aforestated points need proper evidence to be led by the assessee. In this case, there is no basis disclosed by the assessee. Therefore, the judgment of the Madras High Court reported in CIT v. Pathinen Grama Arya Vysya Bank Ltd. : [1977]109ITR788(Mad) , has no application. Whether a loss incurred is a trading loss or capital loss is essentially a question of fact.
5. In the circumstances, the appeal stands dismissed with no order as to costs.
6. C. C. expedited.