Ravanna Mana Eyanna & Co., V. The Commissioner Of Income Tax

1915 Present: Jayetileke and Rose JJ.

RAVANNA MANA EYANNA & CO., Appellant, and THE
COMMISSIONER OF INCOME TAX, Respondent.

S. C. No. 85-Appeal against an Assessment of Excess Profits Duty.

Excess Profits Duty-Determination of capital of a business-Claim to deduct bad debts-Meaning of " debts due "-Excess Profits Duty Ordinance, No. 38 of 1941, s. 10 (1) (b).

In computing the capital of a business, bad and doubtful debts for which a reduction has not been claimed or allowed under section 9 (1) (d) of the Income Tax Ordinance are regarded as debts due to the business within the meaning of section 10 (1) (b) of the Excess Profits Duty Ordinance.

A debt, though it is prescribed, can be regarded as still due; the. expression " debts due " should not be read in a limited sense as meaning debts, the payment of which can be enforced by action.

APPEAL against an assessment of Excess Profits Duty, under section 13 of the Excess Profits Duty Ordinance, No. 38 of 1941.

N. Nadarajah, K.C. (with thin N. Kumarasingham), for the assessees,. appellants.-To determine the capital of a business all bad debts should be deducted. The bad debts in the present case amount to Rs. 29,387 and are, in fact, all prescribed. Section 10 (1) (b) of the Excess Profits-Duty Ordinance speaks of " debts due ". The expression " debts due " connotes something different from " debts " and should be limited to-recoverable debts. The debts must be presently claimable and would exclude any statute-barred debts.

[JAYETILEKE J. referred to section 46 (2) (i) of the Civil Procedure-Code.]

Once a debt is prescribed there is no cause of action. The terms debts due " has a limited meaning-Bell's South African Legal Dictionary, p. 159; Stroud's Judicial Dictionary (2nd ed.), p. 478; Flint v. Barnard 1[(1883) L. R. 22 Q. B. 90 at 92. ]; Sunderam on Income Tax (3rd ed.) p. 643.

H. H. Basnayake, C.C., for the respondent.-There is no finding that the debts in question are prescribed. Even assuming that they are prescribed they can be regarded as " debts due " within the meaning of section 10 (1) (b) of the Excess Profits Duty Ordinance. The corresponding enactment in England is the Finance Act, No. 2 of 1939, Schedule 7, Part II., section 1 (1). The expression " debts due " has, therefore, to be given the meaning it has in English law Wharaka Investment Co., Ltd. v. Commissioner of Stamps 2[(1932) 34 N. L. R. 266 at 272.]. It includes, in England statute-barred debts, for the Statute of Limitations only bars the remedy and does not extinguish the debt-Stroud's Judicial Dictionary (2nd ed.) p. 578; Preston and Newson on Limitation of Actions (1943 ed.) p. 16.

N. Nadarajah, K.C., in reply.-In England a defendant can, after action is filed, waive the benefit of the Statute of Limitations. In Ceylon, however, under sections 44 and 46 (2) (i) of the Civil Procedure Code a plaint will be rejected by court if the cause of action is prescribed.

Cur, adv. vult.

February 20, 1945. JAYETILEKE J.-

This is an appeal by way of case stated by the Board of Review, at the request of the assessees, for the opinion of this court as provided by section 74 of the Income Tax Ordinance (Cap. 188) the provisions of which have been made applicable to an appeal against an assessment of excess profits duty by section 13 of the Excess Profits Duty Ordinance, No. 38 of 1941.

The facts may be shortly summarised as follows:

The 1st appellant and one Krishnapullai carried on business in partnership as Commission Agents and General Merchants under the name of Suna Einna Keena & Co., at Norris road and Fifth Cross street in Colombo. On June 8, 1932, by an indenture marked " A " they admitted one Gopalkrishnapillai as a partner and changed the name to Ravenna Mana Eyanna and Co. Clause 6 of " A " reads-

" All and singular the debts now due to the partnership business of S. E. A. & Co. a

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