By K. B. Bhujle, Advocate
1. Hinduja Ventures Ltd vs.
DCIT [ Income tax Appeal no 270 of 2008, Dated: 2nd August, 2018
(Bombay High Court)].
[Hinduja
Ventures Ltd vs. DCIT; dated 24/08/2006; Mum.
ITAT ]
After
the close of accounting year, the
assessee had received money which it had written off as bad debts in its
accounts. Thus claim for deduction u/s.36(1)(vii) of the Act was disallowed. It
is an agreed position between the parties that after the Amendment with effect
from 1.4.1981 to section 36(1)(vii) of the Act, there is no requirement in law
that the Assessee must establish that the debt infact has become irrecoverable.
This as
requirement of section 36(1)(vii) of the Act to claim deduction on account of
bad debts is for the Assessee to write off the debt as irrecoverable in its
account. This is as held by the Supreme Court in TRF Ltd. vs. CIT (2010)
323 ITR 397.
In this
case, it is undisputed position that the assessee had written off bad debts in
its account for the previous year relevant to the subject assessment year and
claimed deduction u/s. 36(1)(vii) of the Act. Thus, the fact that the amounts
written off as bad debts were recovered subsequent to the end of the accounting
year would not justify the Revenue to disallow the deduction on the ground that
the debt written off was not infact bad debt. In a similar circumstance, this
Court in CIT vs. Star Chemicals (Bombay) P. Ltd. [2009] 313 ITR 126 (Bom)
placed reliance upon Circular No.551 dated 23.1.1990 issued by the CBDT to
conclude that once the Assessee has written off debts as bad debts then the
requirement of section 36(1)(vii) of the Act are satisfied. There is no
requirement to establish that the debt
was infact bad.
The tax on
the amount written off as bad debts in the previous year subject to relevant
Assessment Year has been offered to tax in the year the amounts were recovered
i.e. in the subsequent Assessment Year. The assessee appeal was
allowed.
