Bad debt deduction allowed where money lending advances, succession in business and record evidence establish irrecoverability in the relevant year.

Whether advances totalling the specified sum qualified as a deductible bad debt under section 10(2)(xi) turned on factual findings that the amounts were money lending advances of the assessee's predecessor and that the assessee had succeeded to and continued that business; the Tribunal relied on a registered instrument, account statements and litigation history to find the debt became irrecoverable in the relevant previous year. Those findings were held to be supported by the record and not vitiated for lack of evidence or law, resulting in allowance of the amount as a bad debt for the assessee.

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Issues: (i) Whether the sum of Rs. 10,55,025 due from Kunwar Ganesh Singh was allowable as a bad debt under section 10(2)(xi) of the Income-tax Act?

Analysis: The Tribunal found on the evidence before it that the advances in question were money-lending advances of the assessee's predecessor and that the assessee had succeeded to and continued the money-lending business; the Tribunal relied on the registered instrument dated 30 April 1925, account statements showing advances in the preceding years, and the history of litigation to conclude that the debt in question became irrecoverable only in the previous year for assessment purposes. Those findings are questions of fact supported by materials on record and were not shown to be vitiated by want of evidence or incorrect application of law.

Conclusion: The sum of Rs. 10,55,025 is allowable as a bad debt under section 10(2)(xi) of the Income-tax Act in favour of the assessee.

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