Bad-debt deduction allowed where a business loan remained recoverable until the relevant accounting period despite debtor absconding.

An advance was treated as a loan made in the course of the assessee's money-lending business, not as capital invested in the debtor's business, because the evidence did not prove a capital contribution. The repayment arrangement through Government cheques did not alter the character of the debt. The debt also could not be treated as irrecoverable merely because the debtor absconded; the assessee still had time to assess recovery, and the debt became bad only in the relevant accounting period. The bad-debt deduction was therefore admissible, and the issue was decided against the Revenue.

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Issues: Whether the amount claimed as a bad debt was allowable as a deduction under the income-tax law.

Analysis: The evidence did not establish that the advance was capital invested in the debtor's business rather than a loan made in the course of the assessee's money-lending business. The arrangement for repayment through Government cheques did not displace the character of the debt. The debt could not be treated as irrecoverable in 1928 merely because the debtor absconded; the assessee had time to consider recovery, and the debt became bad only in the relevant account period.

Conclusion: The deduction was admissible and the answer was in the negative against the Revenue.

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