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May 2009

Bad debt : Deduction u/s. 36(1)(vii) of I. T. Act, 1961 : After amendment w.e.f. 01.04.1989 it is not obligatory on the part of the assessee to prove that the debt written off is indeed a bad debt for the purpose of deduction u/s. 36(1)(vii).

By K. B. Bhujle, Advocate
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Unreported :

  1. Bad debt : Deduction u/s.
    36(1)(vii) of I. T. Act, 1961 : After amendment w.e.f. 01.04.1989 it is not
    obligatory on the part of the assessee to prove that the debt written off is
    indeed a bad debt for the purpose of deduction u/s. 36(1)(vii).

 

[DI vs. M/s. Oman International Bank, SAOG (Bom);
ITA No. 114 of 2009; Dated 09.02.2009.]

At the instance of the Revenue the following question was
raised before the Bombay High Court :

“Whether as per the existing provisions even after the
amendment w.e.f. 01.04.1989, is it obligatory on the part of the
assessee to prove that the debt written off by him is indeed a Bad Debt for
the purpose of allowance u/s. 36(1)(vii) ?”

The Bombay High Court answered the question as under :

“The question as framed will have to be answered by
holding that after the amendment it is neither obligatory nor is it a burden
on the assessee to prove that the debt written off by him is indeed a bad
debt as long as it is bona fide and based on commercial wisdom or
expediency.”

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