Amalgamation ends banking business status, preventing post-transfer business deduction claims for bad debts through the transferee-bank.

A statutory amalgamation under section 45 of the Banking Regulation Act, 1949 transfers control of the transferor-bank's assets and liabilities to the transferee-bank from the prescribed date and brings the transferor-bank's banking business to an end. Once the scheme requires closure and balancing of books, the transferor-bank is no longer carrying on the main banking activity, and ancillary realisation of debts does not revive business status for deduction purposes. A claim that the transferee-bank acted as the transferor's agent was inconsistent with the amalgamation scheme. On that footing, the transferor-bank could not deduct the bad debt claimed after amalgamation.

---

---

Issues: Whether, after amalgamation under the Banking Regulation Act, the transferor-bank could still be said to be carrying on business so as to claim deduction of bad debts in computing its income.

Analysis: The scheme of amalgamation under section 45 of the Banking Regulation Act, 1949, made the transferee-bank the entity in control of the assets and liabilities of the transferor-bank from the prescribed date and brought the transferor-bank's business to a halt. The notification and scheme showed that the transferor-bank was required to close and balance its books and thereafter no longer carried on banking activity. Although realisation of debts and turning assets to account may constitute business within section 6(1)(i), that premise failed here because the transferor-bank itself was no longer carrying on the main banking business, and the alleged agency through the transferee-bank was inconsistent with the scheme of amalgamation.

Conclusion: The assessee-bank was not carrying on business after amalgamation and was not entitled to deduct the bad debt of Rs. 58,560.

Ratio Decidendi: Where a banking company's business stands terminated by a statutory scheme of amalgamation under section 45 of the Banking Regulation Act, 1949, it cannot claim business deductions on the footing that it continues to carry on ancillary business through the transferee-bank.

---