Bad-debt deduction depends on factual proof of when the debt became irrecoverable, not unilateral choice by the assessee.

A bad-debt deduction is allowable only in the year in which the loss was actually incurred and as part of the correct computation of that year's profits. A debt that had already become bad before the accounting year cannot be deducted merely because it was written off later. Whether a debt is bad, and when it became bad, is a question of fact to be decided on the evidence by the proper taxing authority or tribunal; time-bar alone does not prove that the debt is bad or fix the date of loss. The assessee therefore had no unilateral option to choose the timing of the deduction, and the disallowance was upheld.

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Issues: Whether an assessee has an option to decide unilaterally when a debt is bad and deductible as a bad debt, or whether the question is one of fact to be determined by the proper taxing authority or tribunal on the evidence.

Analysis: A deduction for bad debts is allowable only as part of the correct computation of the profits and gains of the relevant year, and only for losses actually incurred in that year. A debt which had already become bad before the commencement of the accounting year cannot be deducted in that year merely because it is written off then. Whether a debt is bad, and when it became bad, is a matter of fact to be decided on the relevant evidence by the appropriate tribunal. The mere fact that a debt is time-barred does not by itself establish that it is bad, nor does it fix the date on which it became bad.

Conclusion: The assessee had no unilateral option to declare the debts bad. The issue had to be decided as a question of fact on the evidence, and the disallowance of the disputed bad-debt deduction was restored in favour of Revenue.

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