Bad Debt Deduction: factual proof of irrecoverability and timing governs allowance; appellate review will not displace Tribunal findings.

Bad debt deduction under section 10(2)(xi) requires that the debt be shown irrecoverable on evidence and not exceed amounts actually written off; determination and timing are questions of fact. The Tribunal relied on debtor admissions, correspondence, part payment and the assessee's account entries to conclude most of the debt became irrecoverable before the relevant year and only a limited portion could be allowed in the year claimed. The High Court declined to disturb those fact-based findings, answering the reference against the assessee and in favour of the revenue.

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Issues: (i) Whether the assessee was entitled to claim Rs. 8,324 as a bad debt for the assessment year 1959-60; (ii) If so, at what point of time the debt became a bad debt.

Issue (i): Whether the claimed sum of Rs. 8,324 constituted a deductible bad debt for the relevant assessment year under section 10(2)(xi) of the Income-tax Act, 1961.

Analysis: The statutory allowance for bad and doubtful debts under section 10(2)(xi) is limited to sums estimated by the Income-tax Officer to be irrecoverable, not exceeding amounts actually written off in the assessee's books, and requires that the debt become irrecoverable in the relevant accounting year. Determination of whether a debt is bad depends on factual circumstances including communications from the debtor, any part payments, and the assessee's treatment in its accounts. The Tribunal considered the documentary evidence of demand, correspondence from the debtor conceding inability to pay, the small part payment received, and the assessee's entries in the accounts and concluded there was material to hold the debt bad to a limited extent in the relevant year.

Conclusion: The claim for Rs. 8,324 as a bad debt is not allowable in full; the court upholds the Tribunal's factual finding that the debt was not deductible to that extent in favour of the revenue.

Issue (ii): At what point in time did the debt become a bad debt for the purposes of allowance under section 10(2)(xi) of the Income-tax Act, 1961.

Analysis: Questions as to when a debt becomes bad are questions of fact to be decided on the evidence of communications, payments, and the assessee's conduct up to the relevant accounting date. Evidence before the Tribunal included the debtor's admissions of inability to pay (1956 and subsequent communications), the nominal settlement payment, and the assessee's accounting entries showing the debt as doubtful and its eventual write-off on December 31, 1958. The Tribunal evaluated these materials and concluded that a substantial portion of the debt had become bad prior to the accounting year but that a limited portion could be regarded as becoming bad in the relevant year.

Conclusion: The timing of the bad debt is determined against the assessee; the Tribunal's factual finding that most of the debt became irrecoverable before the relevant accounting year is sustained and the limited allowance made by the Appellate Assistant Commissioner is not increased.

Final Conclusion: The court declines to interfere with the Tribunal's fact-based findings on both entitlement to deduction and the time when the debt became bad and answers the reference against the assessee and in favour of the revenue.

Ratio Decidendi: Determination of whether a debt is bad and the date it became irrecoverable is a question of fact to be decided from the congeries of circumstances and evidence before the Tribunal; a reviewing court will not overturn such factual findings where there is material on which the Tribunal could reasonably reach its conclusion.

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