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Issues Involved:
1. Entitlement to claim bad debts amounting to Rs. 38,35,689. 2. Entitlement to claim sums of Rs. 10,15,000 and Rs. 98,892 as a business loss under section 10(2)(XV) of the Income-tax Act. Issue-wise Detailed Analysis: 1. Entitlement to Claim Bad Debts Amounting to Rs. 38,35,689: The primary issue was whether the assessee could claim bad debts amounting to Rs. 38,35,689, which had not been written off in its books of account. The court had previously adhered to its earlier decisions, ruling that it was not competent for the assessee to claim a bad debt without it being written off in the books of account. This decision was in favor of the revenue, despite the assessee's reference to a differing view from the Calcutta High Court. The court reaffirmed its stance that the bad debts must be written off to be claimed, thus answering the question against the assessee. 2. Entitlement to Claim Sums of Rs. 10,15,000 and Rs. 98,892 as a Business Loss: The second issue involved the claim of two sums, Rs. 10,15,000 and Rs. 98,892, as a business loss under section 10(2)(XV) of the Income-tax Act. The court reframed the question to consider whether these sums could be claimed as a business loss or as a deduction under section 10(2)(XV). The court noted that the losses were due to defalcations by the bank's secretary and had occurred before the bank went into liquidation on 21st April 1947. The court emphasized that the loss must be actual and present, as established by the Supreme Court of the United States in Burnet v. Huff. The court found that the liquidator, who took charge after the bank went into liquidation, obtained a decree against the secretary for Rs. 10,00,000, indicating that the loss was not actual and present at the time of the embezzlement. Therefore, the court concluded that the assessee was not entitled to claim the sum of Rs. 10,15,000 as a business loss in the year of account. Regarding the sum of Rs. 98,892, the court found that the embezzlement had occurred about two years before the year of account. The court deemed the fact that no interest was charged on this amount after 31st December 1946 as insufficient to establish the loss in the year of account. Consequently, the court ruled that the assessee was not entitled to claim this amount as a business loss. Conclusion: The court answered both questions in the negative, ruling against the assessee's claims for bad debts and business losses. The court also recommended that the Revenue consider providing substantial relief to the assessee, given the extraordinary circumstances and the significant losses incurred by the bank and its depositors.
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