Bad debt deduction turns on irrecoverability by year-end, and debts can be treated as bad in that year.

Trade debts due from four sick textile mills were treated as bad and irrecoverable once the mills had been taken over by the State and nationalised from 1 April 1974. As the Revenue did not dispute that the debts had become irrecoverable by that date, it was reasonable to regard them as bad by 31 March 1974, the end of the relevant previous year. On those facts, the Tribunal's view that the assessee was entitled to the deduction in assessment year 1974-75 was upheld.

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Issues: Whether the trade debts due from the four sick textile mills had become bad and irrecoverable so as to justify their write-off in the assessment year 1974-75.

Analysis: The debts were admittedly irrecoverable. The mills had been taken over by the State Government and were subsequently nationalised with effect from 1 April 1974. Since the Revenue did not dispute that the debts had become irrecoverable by that date, it was reasonable to treat them as having become bad even on the preceding day, 31 March 1974. On the facts found, the Tribunal's conclusion that the assessee was entitled to the deduction in the earlier assessment year was correct.

Conclusion: The write-off was allowable in the assessment year 1974-75 and the reference sought by the Revenue was not warranted.

Final Conclusion: The Tribunal's view on the timing of the bad debt was upheld, and the tax case petition failed.

Ratio Decidendi: Where a debt is shown to have become irrecoverable by the end of the relevant previous year, it may be treated as bad in that year for deduction purposes.

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