Judgment

HEGDE, J.: The appellant firm (which will hereinafter be referred to as the "assessee") carried on business In drugs, chemicals, mercury, camphor and art silk yarn as also in money-lending, over a number of years. The accounting year with which we are concerned in this appeal is Samvat year 2008 commencing from October 31. 1951 and ending on October, 18, 1952. The firm consisted of two partners, Mohanlal Bagmal and Seshmal Sobhachand Two minors, Ramaniklal Sobhachand and Lakshmichand Sobhachand were admitted to the benefits of the partnership. The assessee had dealings for several years with a firm known as "Bhojaji Sobhachand" (to be hereinafter referred to as the Bombay Firm) Sobhachand Amarchand, a partner of the Bombay firm, is the father of Seshmal, Ramaniklal and Lakshmichand and he was having sixteen per cent share in the Bombay firm. That firm became insolvent in April 1952. The Bombay firm owed certain amount to the assessee. In the assessment of income-tax of the appellant for the assessment year 1952-53, relevant to the accounting year Samvat 2008, the assessee claimed a deduction of Rs. 2,68,385 as bad debt due from the Bombay firm, incurred by that firm in the