Law:

Section:

Section 36(1)(vii) of the Income-tax Act, 1961 - Bad debts - Assessment year 1996-97 - Assessee filed its return wherein certain amount was claimed as bed debts - In support of claim, assessee submitted that it had issued computer generated reminders to customers in a standard proforma - Assessing Officer accepted a part of assessee's claim - Tribunal, however, allowed assessee's claim in full - Whether when an assessee writes off a debt or part thereof as irrecoverable in accounts for previous year, same can be allowed as deduction under section 36(1)(vii) and, no further proof is necessary - Held, yes - Whether, therefore, Tribunal was justified in allowing assessee's claim - Held, yes [In favour of assessee] FACTS The assessee filed its return wherein certain amount was claimed as bad debts. The said amount consisted of twenty items. After conducting enquiry, the Assessing Officer came to the conclusion that eleven items of bad debts, in a sum of Rs. 11,85,086 could not be written off as bad debts and that the explanation of the assessee that it had issued computer generated reminders to the customers (sundry debtors) in a standard proforma was not convincing. The Assessing Officer, however, allowed the claim of the assessee for bad debts in a sum of Rs. 2,41,174. The Commissioner (Appeals) upheld the order of the Assessing Officer. On second appeal, the Tribunal, however, allowed the assessee's claim in full. On revenue's appeal: HELD A plain reading of section 36 would show that, if an assessee writes off a debt or part thereof as irrecoverable in the accounts for the previous year, the same can be allowed as deduction under section 36(1)(vii). The controlling words/phrase in clause (vii) is 'which is written off as irrecoverable'. No further proof is necessary. [Para 6] In the case on hand, the assessee claimed that computer generated reminders were sent to the customers on weekly basis in a standard proforma. The Assessing Officer accepted this to a certain extent, and, had allowed deduction towards bad debt to an extent of Rs. 2,41,174 disallowing Rs. 11,85,086, only on the ground that the assessee did not produce office copies of the reminders sent to…

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