Bad debt deduction under Section 36(2)(i) survives later discontinuance of money-lending business when statutory conditions are met.

A bad debt deduction under Section 36(2)(i) is allowable where the debt was taken into account in computing income or arose from money lent in the ordinary course of the assessee's money-lending business. Subsequent discontinuance of that business does not, by itself, defeat the deduction if the statutory conditions are otherwise met. The Revenue's relied-upon precedent was found inapplicable because it concerned a different statutory liability arising from transfer of business. The assessee was therefore entitled to the deduction and the disallowance was unsustainable.

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Issues: Whether the assessee was entitled to deduction of bad debts under Section 36(2)(i) of the Income-tax Act despite discontinuance of the money-lending business in the subsequent year.

Analysis: Deduction of a bad debt under Section 36(2)(i) depends on whether the debt was taken into account in computing the assessee's income of the relevant previous year or an earlier previous year, or whether it represented money lent in the ordinary course of money-lending business carried on by the assessee. The mere fact that the money-lending activity was discontinued later does not by itself defeat the claim when the debt had arisen from money lent in the ordinary course of that business. The decision relied on by the Revenue was held to be inapplicable because it concerned a different statutory liability arising from transfer of business.

Conclusion: The assessee was entitled to the bad debt deduction, and the disallowance was unsustainable.

Ratio Decidendi: A bad debt deduction cannot be denied under Section 36(2)(i) merely because the money-lending business was subsequently discontinued, if the debt arose in the ordinary course of that business and the statutory conditions for deduction are otherwise satisfied.

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