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Determination of whether a sum due from an individual was allowable as a bad debt under section 10(2)(xi) of the Income-tax Act. Detailed Analysis: The case pertains to the assessment year 1957-58, with the primary issue being the allowance of a sum of Rs. 10,55,025 due from Kunwar Ganesh Singh as a bad debt under section 10(2)(xi) of the Income-tax Act. The assessee inherited a money-lending business from his father and entered into a partnership agreement with Ganesh Singh, which eventually led to a debt owed by Ganesh Singh to the assessee's father. Despite legal proceedings and attempts at recovery, only a small portion of the debt could be realized. The Income-tax Officer and the Appellate Assistant Commissioner initially disallowed the claim, but the Appellate Tribunal allowed a portion of the debt as a bad debt, leading to a reference being made to the High Court for determination. One of the key contentions raised was whether the debt in question was related to the money-lending business carried out by the assessee, considering the change in the relationship between the parties over time. The Tribunal found that the entire debt represented money-lending advances made by the assessee's father and concluded that there was no discontinuance of the money-lending business, thereby justifying the write-off of the debt by the assessee as bad in the previous year. The High Court upheld the Tribunal's findings, emphasizing that the relationship between the parties had evolved into that of creditor and debtor, allowing for the debt to be considered part of the money-lending business. The court also noted that there was no evidence to suggest that the debt had become bad before the previous year, as indicated by the continued pursuit of recovery through legal means. The court deemed the Tribunal's conclusions as findings of fact based on the evidence presented and therefore conclusive, leading to the affirmation of the allowance of the debt as a bad debt under section 10(2)(xi) of the Income-tax Act. In conclusion, the High Court answered the question framed in the affirmative, disposing of the reference in favor of the assessee and awarding costs for the reference. The judgment highlights the importance of establishing the business context and evolution of relationships in determining the treatment of debts for income tax purposes.
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