M. K. SHAH, J. ( 1 ) MR. B. R. Shah the learned advocate appearing for the appellants has made three submissions. I shall take up these submissions in the order in which they were presented to this court. ( 2 ) THE trial court erred in holding that the defendant was not liable to share in the bad debt to the tune of Rs. 40 0 which was written off after dissolution by the plaintiffs. There was a decree obtained against the judgment debtor in favour of the partnership firm in the year 1968 for this amount and the trial court held that as without consent of the defendant the plaintiffs had written off this amount after dissolution the defendant would not be in any way concerned with the same. In Mr. Shahs submission the writing off of a bad debt in the books of account of the firm is inter se arrangement between the partners of the firm and it does not affect the debtors or a third party. The right to recover a debt in respect of which a decree is already passed in the instant case is not lost and there is therefore no substance submits Mr. Shah in the defendants contention that this amount is lost to the firm as it was written off. It is common knowledge that debts which are treated as bad debts are written off in this fashion in order to get permissible income-tax deduction or relief. But if in fact. they are recovered in future they are to be treated as profits and are liable to income-tax. There is considerable force in this submission of Mr. Shah as is evident from a bare reading of the relevant provisions contained in the Income tax Act. Sec. 36 (1) (vii) provides thus:" (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein in computing the income referred to in sec. 28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (VII) subject to the provisions of sub-sec. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (VII) subject to the provisions of sub-sec. (2) the amount of any debt or part thereof which is established to have become a bad debt in the previous year. "sub-sec. (2) contains provisions which apply in making any deduction for a bad debt or part thereof and inter alia prescribes procedure to be followed for the purpose. Sec 41 (4) provides thus:"where a deduction has been allowed in respect of a bad debt or part of debt under the provisions of clause (vii) of sub-sec. (1) of sec. 36 then. if the amount subsequently recovered on any such debt or part is greater than the difference between the debt or part of debt and the amount so allowed the excess shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of the previous year in which it is recovered whether the business or profession in respect of which the deduction has been allowed is in existence in that year or not. "it appears that the lower court lost sight of the legal position with regard to the effect of making entries in the account book writing off bad debts. ( 3 ) MR. B. R. Shah has made a statement from the bar that if in furture the amount of the decree or any part thereof is recovered by the plaintiffs or any one or more of them then they will pay over to the defendant his share in the said recovery that is at the rate of 12 paise in a rupee after making allowance for the expenses incurred for making recovery and even otherwise in law the defendant would be entitled to claim and receive his share in such recovery if any made in future. ( 4 ) BUT Mr. ( 4 ) BUT Mr. Gandhi in this connection urges that the instant case stands on a different footing by virtue of the fact that the plaintiffs on dissolution had taken over outstandings and all other assets of the partnership business and that therefore if there is any writing off of any such outstanding of the firm after the dissolution it would be a matter that will concern them only and if they recovered the same they will be entitled to the same. Mr. Gandhi has not been able to point out Any material on record justifying a conclusion that the outstandings and all other assets of the business were taken over by the plaintiffs on dissolution. Mr. Gandhi drew my attention to some observations of the lower court in para 16 of the judgment wherein it is inter alia observed as follows:"the plaintiffs on the dissolution of the firm ale shown to have taken all the assets and business of the partnership. "now this observation in my opinion is not based on any material on record. A glance at the preliminary decree will show that these observaations are contrary to the preliminary decree. What is stated in the preliminary decree is that the defendant is to be considered as having retired from the partnership firm on and from 7-3-1969 and that from that date it is decided that the firm is dissolved. It is then stated in the decree that the accounts of the partnership business have to be taken till 7-3-1969 as per the partnership deeds dated 3-4-1964 and 23-4-1965 and in order to fix liabilities accordingly directions are given to the Commissioner for taking accounts. Thus the accounts have to be taken of the partnership business including all its assets liabilities goodwill as also profits and losses and it was therefore. not correct to say that the outstandings and all assets of the firm have been taken over by the plaintiffs on and from the date of dissolution though it is true that as the defendant is to be treated as a person retiring from the partnership firm from that date the plaintiffs that is the remaining partners may continue to do business in that name from the date of dissolution. In this view of the matter an amount of Rs. In this view of the matter an amount of Rs. 4 800 which is 12% share of the defendant in the said decretal amount which is yet to be recovered (though written off by the plaintiffs) therefore will have to be deducted from the decree that may be passed against the plaintiffs in favour of the defendant. Appeal partly allowed. .