COMMISSIONER OF INCOME-TAX, CALCUTTA vs BIRLA BROS. (P) LTD.

The Supreme Court ruled that under Section 10(2)(xi) of the Indian Income-tax Act, 1922, a bad debt must arise in the course of the assessee's business. The Court held that the guarantee provided by the assessee for a loan to a selling agent did not constitute a bad debt since there was no contractual obligation or legal relationship between the assessee and the selling agent. Consequently, the claim for the amount written off as a bad debt was rejected, affirming the decision of the Income-tax Officer and the Assistant Commissioner.