Law:

Section:

Section 36(1)(viii) of the Income-tax Act, 1961 - Bad debts - Assessment year 1997-98 - Whether deduction under section 36(1)(vii) can be allowed as bad debts only when it is actually written off as irrecoverable in accounts and not on basis of a mere provision - Held, yes FACTS For the assessment year 1997-98, the assessee claimed bad debt of certain amount. The Assessing Officer disallowed the claim of the assessee on the ground that it was shown as a provision for bad and doubtful debts in the books of the assessee, but the assessee had not actually written off the bad debts as irrecoverable in its books of account. On appeal, the Commissioner (Appeals) allowed the assessee's claim. On revenue's appeal, the Tribunal confirmed the order of the Commissioner (Appeals). On revenue's appeal : HELD No doubt prior to 1-4-1989, even if the debt had not been written off, it could be allowed as a 'bad debt' if the assessee could establish that the debt had in fact become bad. However, after the amendment with effect from 1-4-1989, there is an additional requirement in section 36(1)(vii), namely, that the 'bad debt' should be written off as irrecoverable in the accounts of the assessee for the previous year. Hence, unless it is written off as irrecoverable in the accounts, it cannot be allowed as a 'bad debt'. [Para 14] Thus, for and from the assessment year 1989-90, the requirement as to the writing-off of the debt as irrecoverable has become essential for a claim of 'bad debt' to be allowed. [Para 16] Thus, it is a mandatory condition that deductions can be allowed as bad debts only when it is actually written off as irrecoverable in the accounts and not on the basis of a mere provision. [Para 17] In the instant case, the assessee did not write off the debt in question as irrecoverable in his accounts for the previous year. Hence, on the plain language of section 36(1)(vii) the debt cannot be allowed as a 'bad debt'. Making a provision is not the same thing as writing off a debt as irrecoverable. [Para 30] Therefore, impugned s of the Tribunal and of the Commissioner (Appeals) with respect to the claim of the assessee regarding bad debts were set aside and the order…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492