ASSOCIATED BANKING CORPORATION OF INDIA LTD. vs COMMISSIONER OF INCOME-TAX, BOMBAY-1.

The Supreme Court held that under Section 10(2)(xi) of the Income Tax Act, 1922, a bank in liquidation is entitled to claim Rs. 15,00,000 as bad debts even if not written off in the books, provided there is a reasonable explanation for the absence of such entry. The Court clarified that the income-tax officer can estimate irrecoverable debts without a written-off entry, as long as the amount does not exceed what is actually written off. However, the Court ruled that the bank could not claim embezzled amounts as business losses since the loss was not ascertained in the year of account, thus denying the deduction for embezzlement under Section 10(2)(xv).