BADRIDAS DAGA vs THE COMMISSIONER OF INCOME-TAX

The Supreme Court ruled that the amount misappropriated by an agent, which was irrecoverable, is not deductible as a bad debt under Section 10(2)(Xi) or as business expenditure under Section 10(2)(XV) of the Indian Income-tax Act, 1922. However, it can be deducted under Section 10(1) as a loss incidental to the carrying on of business. The Court emphasized that losses from misappropriation by an authorized agent are considered incidental to business operations, negating the need to prove that the funds were used for business purposes.