the transaction related to the predecessor firm and the suit instituted by it had been continued by the assessee on taking over the assets and liabilities of the predecessor firm.
at the instance of the commissioner of income tax a reference was made to the high court of andhra pradesh for its opinion on the question set forth earlier.
25000 was accepted by the assessee in satisfaction of the debt and that the balance of rs.15100 was written off by the assessee as irrecoverable.
the business carried on by the predecessor firm was number carried on by the assessee.
holding that there was justification for writing off the bad debt in the measure claimed by the assessee the appellate assistant commissioner allowed the appeal.
these included a debt of rs.23577 due from laxmi trading company to the predecessor firm.
from the judgment and order dated 16.1.1974 of the andhra pradesh high companyrt in case referred number 9 of 1972.
all the assets and liabilities of the predecessor firm passed on to the assessee firm.
in assessment proceedings for the assessment year 1965 66 for which the previous year was the year ending march 31 1965 the assessee claimed a deduction of the aforesaid sum of rs.
the income tax officer disallowed this claim also but in appeal the appellate assistant companymissioner upheld the claim.
on march 31 1965 the parties effected a settlement under which a sum of rs.25000 was accepted by the assessee in full settlement of the said debt.
6880 before the income tax officer on the ground that the assessee had incurred legal expenses in that amount in companynection with an appeal filed in the supreme companyrt for the purpose of recovering a sum due from the central government.
the income tax officer disallowed the claim on the ground that the debt was due originally to the predecessor firm that there was no reason to take over the loan by the assessee firm and further that it was number proved that the debtor was so financially embarrassed that he was unable to pay the debt.
civil appellate jurisdiction civil appeal number 114 nt of 1975.
the amount of interest was taxed in the hands of the assessee for the assessment year 1963 64.
it numbered that the assessee had number only treated the amount a debt owed to it but had allowed the interest accrued thereon to be assessed in its hand as the interest constituted part of the debt.
15100 written off as a bad debt.
the facts also show that the assessee paid income tax on the interest income accruing on the debt for the assessment year 1963 64.
the balance of rs.15100 was written off as irrecoverable.
11349 for the period april 31 1960 to march 31 1961.
it is number disputed that the assessee succeeded to the business of the predecessor firm and took over all its assets and liabilities including the debt due from laxmi trading companypany.
he also numbered that the assessee had paid income tax on the interest of rs.11349 in an earlier assessment year and held that the assessees bonafides stood established.
it took over the business of an earlier firm.
the total amount due in the account relating to laxmi trading companypany was rs.40549 comprising an outstanding amount of rs.
the assessee is a partnership firm.
b. ahuja and miss a. subhashini for the appellant.
29200 and interest thereon in the sum of rs.
the judgment of the companyrt was delivered by pathak j. this appeal by special leave is directed against the judgment of the high companyrt of andhra pradesh disposing of a reference made under sub s. 1 of s.256 of the indian income tax act 1961 for its opinion on the following question of law.
subba rao for the respondent.
