Irrecoverable debt requires evidence of no real hope of recovery; conjecture and insolvency alone are insufficient.

A debt can be treated as irrecoverable only when the record shows that no real hope of recovery remained at the relevant time, and that finding must rest on material evidence rather than conjecture. Here, the Tribunal's view that the debt had become irrecoverable long before the accounting year was unsupported, because insolvency, an earlier dividend payment, and later non-recovery did not by themselves establish loss of hope of recovery. Correspondence from the official receiver also showed that recovery prospects were still uncertain. The finding on timing of irrecoverability could not stand, and the reference was answered in the assessee's favour.

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Issues: Whether there was any material on the record to justify the finding that the debt became irrecoverable long before the relevant accounting year.

Analysis: A debt can be treated as irrecoverable only when there is no real hope left of recovery. The finding that the debt had become irrecoverable soon after 1941 was based on conjecture rather than evidence. The mere fact of insolvency, payment of an earlier dividend, and later non-recovery did not by themselves establish that the assessee had lost all hope of recovery at that time. On the contrary, the correspondence from the official receiver in March 1949 indicated that the position was still uncertain and that further recovery was not ruled out. The finding of the Tribunal was therefore unsupported by material on the record.

Conclusion: The finding that the debt became irrecoverable long before the year in question could not stand.

Final Conclusion: The reference was answered in the assessee's favour, and the Tribunal's conclusion on the timing of irrecoverability was set aside.

Ratio Decidendi: A debt cannot be treated as irrecoverable unless the record shows that no real hope of recovery remained at the relevant time; a factual finding to that effect must rest on material evidence and not conjecture.

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