Law:

Section:

Section 36(1)(vii) of the Income-tax Act, 1961 - Bad debts - Assessee wrote off certain amount on account of its having became bad debt and claimed deduction of same - Assessing Officer disallowed assessee's claim on ground that assessee did not prove that debt had become bad and that he did not try to recover amount - Commissioner (Appeals) as also Tribunal allowed assessee's claim on ground that as per provisions of section 36(1)(vii) as amended from 1-4-1989, assessee was not required to establish that debt had become bad and that mere writing off of amount as bad debt was sufficient - Whether no question of law arose from order of Tribunal - Held, yes FACTS The assessee had, in the course of business, advanced some money to a firm 'A' which was a sole selling agent of a company., in which it had deposited the loan amount as security. The company incurred losses and ultimately closed down its business and, therefore, the firm 'A' could not realise its money from that company and the assessee, in turn, could not realise its dues from firm 'A'. The assessee wrote off said amount as bad debt and claimed deduction of same. The Assessing Officer disallowed the assessee's claim on the ground that the assessee could not prove that the debt had become bad and that the assessee did not try of recover the amount and further that mere delay in recovery did not convert the debt into a bad debt. The Commissioner (Appeals) found that the provisions of section 36(1)(vii) as amended from 1-4-1989 were applicable under which the assessee was not required to establish that the debt had become bad in the previous year and mere writing off of the amount as bad debt was sufficient and accordingly, allowed the assessee's claim. The Tribunal upheld the findings of the Commissioner (Appeals). On application under section 256(2): HELD Under the provisions of section 36(1)(vii ), deduction was to be allowed in computing the income referred to in section 28 of the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year subject to the provisions of sub-section (2). Prior to the amendment from 1-4-1989, the…

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