Business loss and bad debt treatment denied where ex-partner's unpaid share of partnership loss was not a recoverable debt.

An amount paid by an assessee because an ex-partner could not bear his share of a partnership loss was held not to qualify as a deductible bad debt or as a business loss set off against other income under section 24. The loss had already been reflected in the partnership accounts up to closure of the cotton business, and no further loss of the assessee beyond what had been allowed in assessment was shown. After closure, the liability was not a debt owed to the assessee's money-lending business, since no loan had been advanced to the ex-partner. The transaction was therefore treated, at most, as a loss connected with the cotton business, with the result that the claim failed.

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Issues: Whether the amount paid by the assessee on account of the ex-partner's inability to bear his share of the partnership loss could be treated as a business loss or bad debt and set off against the assessee's other income under section 24.

Analysis: The loss already reflected in the partnership accounts up to the closure of the cotton business was not shown to be a further loss of the assessee beyond what had already been allowed in assessment. After the business closed, the liability that arose was not a debt owed by the ex-partner to the money-lending business, because that business had never advanced money to him. The transaction, at most, represented a loss connected with the cotton business and not a bad debt of the assessee's money-lending business.

Conclusion: The claimed amount could not be treated as a deductible bad debt or as a loss capable of set-off against the assessee's other income. The question was answered in the negative, in favour of the Revenue.

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