Business loss deduction turns on bona fide loss of recovery hope and write-off in the relevant year.

A business loss from embezzlement by an assessee's agent was held deductible in the year when the assessee honestly and bona fide lost hope of recovery and wrote off the amount. The Tribunal accepted that recovery remained possible until the relevant previous year, so the claim properly related to that year rather than an earlier one. The loss was therefore treated as a business loss deductible in the relevant assessment year, and the matter was decided in favour of the assessee.

---

---

Issues: Whether the loss of Rs. 89,112 was a business loss and deductible in the relevant assessment year.

Analysis: The loss arose from the embezzlement by the assessee's agent and the Tribunal found that the assessee honestly and bona fide believed that there was a chance of recovery until the relevant previous year. The claim was therefore linked to the year in which the hope of recovery finally disappeared and the amount was written off. In these circumstances, the loss was treated as a business loss rather than as an earlier year claim.

Conclusion: The loss of Rs. 89,112 was a business loss and the question was answered in favour of the assessee.

Ratio Decidendi: A loss is deductible in the year in which the assessee genuinely and bona fide loses the hope of recovery and writes it off as a business loss.

---