Revenue cannot deny money-lending character after taxing the same transactions as business receipts; bad-debt deduction allowed.

Receipts from bonds, handnotes and promissory notes taken from tenants in lieu of agricultural rent were treated by the revenue as part of the assessee's money-lending activity in earlier years, including taxation of interest on that footing. Having consistently adopted that character, the revenue could not later deny that the same transactions formed part of the money-lending business when deduction was claimed for irrecoverable amounts. The court held that the investments were money-lending transactions and that the bad-debt claim fell within the relevant allowance provision, so the deduction was allowable.

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Issues: Whether bonds and promissory notes taken from tenants in lieu of arrears of agricultural rent, and earlier treated by the department as part of the assessee's money-lending activity, could be regarded as loans made in the ordinary course of money-lending business so that the irrecoverable amounts were deductible as bad debts.

Analysis: The assessment records showed that the department had repeatedly treated the handnotes and mortgage bonds obtained from the tenants as money-lending investments. Interest arising from them had been brought to tax under the money-lending head in earlier years, and in one year a substantial amount had been added to the assessable income on that footing. Having adopted that position for taxation, the department could not later deny that the same transactions formed part of the assessee's money-lending business when the assessee claimed deduction for irrecoverable amounts. On the facts, the investments were part of the assessee's money-lending transactions and the bad-debt claim fell within the relevant allowance provision.

Conclusion: The question was answered in the affirmative, and the assessee was entitled to deduction of the irrecoverable amounts as bad debts of the money-lending business.

Ratio Decidendi: Where the revenue has consistently treated receipts from a set of transactions as arising from the assessee's money-lending business, it cannot repudiate that character for denying deduction of irrecoverable amounts arising from the same transactions; such amounts are deductible as bad debts of that business.

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