1. This appeal is preferred against the judgment of the Allahabad High Court (see [1981] 130 ITR 41), answering the question referred to it in the negative, i.e., in favour of the Revenue and against the assessee. The question referred to the High Court under Section 256(1) of the Income-tax Act, 1961, reads (at page 43) :
Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 60,000 paid to Shri Mohan Lal Vyas represented the trading loss of the assessment year 1964-65 ?
2. The appellant's accounting year relevant to the assessment year 1964-65 was the year ending April 30, 1963.
3. The appellant is a partnership-firm engaged in the business of manufacture and sale of miniature bulbs. In the assessment proceedings relating to the year 1964-65, it claimed a deduction of a sum of Rs. 60,000 as a bad debt. According to the appellant, it proposed to expand its business to undertake the manufacture of fluorescent tubes. For that purpose, it sought the assistance of one Mohan Lal Vyas and paid to him, between July, 1961, and April, 1962, a sum of Rs. 60,000. In return, the said person agreed to procure the manufacturing licence under the provisions of the Industries (Development and Regulation) Act and a licence or permit for the release of foreign exchange necessary for the import of machinery, plant and equipment for the manufacture of fluorescent tubes. Mohan Lal Vyas procured the manufacturing licence on December 5, 1961, but he could not procure a licence or permit for the release of requisite foreign exchange for import of machinery, plant and equipment. Since the appellant could not import the machinery, the Government revoked the manufacturing licence as well. The appellant's case was that inasmuch as there was a stipulation between it and Mohan Lal Vyas whereunder the latter undertook to refund the said sum of Rs. 60,000 in the event of his failure to obtain the said licences and permits, the appellant filed a suit for recovery of the said sum being Original Suit No. 106 of 1964 on the file of the Civil Judge, Kanpur. The suit was decreed ex parte. The appellant, however, took no steps whatsoever to execute the said decree with the result that no amount was recovered thereunder. The appellant says, it treated it as a bad debt and debited the said amount to the profit and loss account, on April 30, 1963. It is on the above facts that the said deduction on account of bad debt was claimed.
4. The Income tax Officer rejected the appellant's claim. He found the . whole story doubtful. He commented on the fact that no proceedings were ever taken for execution of the decree. On appeal, the Appellate Assistant Commissioner agreed with the Income-tax Officer and dismissed the appeal. The assessee filed a. further appeal to the Tribunal. Before the Tribunal, it shifted its stand. It now claims the said amount as a business loss. The Tribunal not only allowed the appellant to shift the basis of his claim but also allowed it-without examining whether such a payment could ever be admitted as a trading loss. Be that as it may, the Revenue applied for and obtained reference of the aforementioned question under Section 256(1) of the Act. The High Court opined that if it is a trading loss, it arose in the accounting year relevant to the previous assessment year (1963-64) and not in the accounting year relevant to the assessment year 1964-65, wherein it was claimed. It noticed that even according to the appellant, the entire amount of Rs. 60,000 was paid during the accounting year ending April 30, 1962, and further that the failure to obtain the licenses permits, which entitled the appellant to refund of the amount, also occurred during the said accounting year. The appellant then urged a new argument before the High Court, viz., that the trading loss must be deemed to have occurred in the year in which the contract became incapable of performance and that the said situation arose only in the accounting year relevant to the assessment year 1964-65. This argument was rejected by the High Court, and rightly in our opinion, observing that it was never the basis of the assessee's claim that the contract became incapable of performance when the licence under the I. D. R. Act was revoked. On the contrary, the High Court pointed out, the assessee's case before the Appellate Tribunal (on the basis of the receipt dated December 31, 1961) was that Mohan Lal Vyas had undertaken to obtain the foreign exchange permit on or before January 15, 1962, and in the event of delay or failure in doing so, he undertook to return the amount.
5. In the circumstances, the High Court held that the trading loss claimed by the appellant had occurred during the accounting year ending on April 30, 1962, and cannot be allowed in the assessment year 1964-65. We see no reason to take a different view of the matter. On the facts found and evident from the record, the conclusion of the High Court is unexceptionable.
6. The appeal accordingly fails and is dismissed. No order as to costs.