Business loss deduction denied where guarantee payment lacked direct nexus to the assessee's money-lending business.

A payment made under a guarantee for a company in which the assessee held shares and was a director was not deductible as a bad debt or as a business loss. Although the assessee's ordinary business was money-lending, the guarantee was not a loan or advance made in that business, and a deductible loss must have an intimate and direct connection with the business, not a remote or indirect one. Any benefit to the money-lending business was merely consequential, so the claimed deduction failed under the applicable provisions of the Indian Income-tax Act, 1922.

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Issues: Whether the amount paid under a guarantee given to a bank on behalf of a company in which the assessee was interested could be deducted as a bad debt or as a loss in money-lending business under the Indian Income-tax Act, 1922.

Analysis: The assessee's ordinary business was money-lending, but the guarantee was not itself a loan or an advance made in the course of that business. A deductible business loss must have an intimate and direct relation to the business, and not a remote or indirect connection. The guarantee was given for a company in which the assessee held shares and was a director, and the supposed benefit to the assessee's money-lending business was only consequential and indirect. The cases relied upon were distinguished because they involved direct debtor-creditor transactions, customary commercial guarantees, or liabilities incurred in the ordinary course of the assessee's business.

Conclusion: The guarantee payment was not an admissible bad debt or business loss under section 10(2)(xi) or section 10(2)(xv) of the Indian Income-tax Act, 1922.

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