Bad debt deduction allowed where advances were in the ordinary course of a money lending business; factual finding upheld.

The allowance of a bad debt under section 10(2)(xi) was sustained because the advances were held to be made in the ordinary course of the assessee's money lending business; the Tribunal's factual finding was supported by accounts, prior receipt of interest, and acceptance of an assignment in part satisfaction. Challenges based on absence of credited interest and accounting form were rejected as insufficient to displace the Tribunal's conclusion. The legal issue turned on the true nature of the transactions-a question of fact properly resolved for the assessee-and the amount was held allowable as a bad debt.

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Issues: Whether the amount of Rs. 1,06,834 could legally be allowed as a bad debt under section 10(2)(xi) of the Income-tax Act, 1961.

Analysis: The Tribunal found on the primary facts that the assessee held a money-lending licence, had repeatedly received interest on advances, and had made cash advances to Bihar Agents Private Ltd. which were recorded as money-lending advances. The Tribunal examined the accounts and concluded that the entire sum due from Bihar Agents Private Ltd. represented advances in the ordinary course of the assessee's money-lending business and that Rs. 2,25,000 of book debt (assignment from Bihar Glass Factory) was accepted in part satisfaction of those advances. The High Court reviewed the supplementary statement and the Tribunal's reasoning and held that the omission of the word "ordinary" in one part of the supplementary statement did not alter the Tribunal's clear finding that the advances were in the ordinary course of money-lending business. The Court rejected contentions based on the absence of credited interest and alleged non-mercantile accounting as insufficient to displace the Tribunal's factual finding and held that the legal question turns on the true nature of the transaction, which was a question of fact properly resolved by the Tribunal.

Conclusion: The question is answered in the affirmative and the amount of Rs. 1,06,834 is legally allowable as a bad debt under section 10(2)(xi) of the Income-tax Act, 1961; decision is in favour of the assessee.

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