Business loss deduction denied where lease transaction was outside the assessee's business and the write-off was capital in nature.

A loss arising from a transaction wholly outside the assessee's business could not be deducted as a business loss or bad debt merely because it was written off in the business accounts. The lease arrangement for a building in Mogul Street was not part of the assessee's money-lending business, and the recovery of rent from sub-lessees did not convert it into a business operation. The claimed amounts were therefore treated as capital in nature and not allowable in computing business profits, with the disallowance upheld.

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Issues: Whether the sum of Rs. 22,712 and Rs. 1,335 claimed by the assessee could be deducted in computing the profits of his Rangoon business as business loss or bad debt, or whether the disallowance of the claim as capital loss was justified.

Analysis: The lease transaction was entered into for a building in Mogul Street and was not part of the assessee's money-lending business. The arrangement to recover rent from sub-lessees did not convert the venture into a business operation of money-lending. Since the loss arose from a transaction wholly outside the business, it could not be treated as a business loss. A sum not arising in the course of the business cannot become deductible merely because it was written off in the business books.

Conclusion: The claim for deduction was not allowable and the disallowance was upheld.

Final Conclusion: The reference was answered against the assessee, and the claimed amounts were held to be capital in nature and not deductible in computing business profits.

Ratio Decidendi: A loss arising from a transaction outside the assessee's business cannot be deducted as a business loss or bad debt merely because it is written off in the business accounts.

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