By K. B. Bhujle | Advocate
New Page 2
Reported :
47. Bad debts : S.
36(1)(vii) of Income-tax Act, 1961 : No evidence that amount not taken into
account in computing income of prior years : Bad debt allowable as deduction.
[CIT v. Dwarika
Industrial Development and Chains (P) Ltd., 325 ITR 211 (All.)]
In the relevant year, a sum
of Rs.6,27,735 was lying under the head ‘sundry debtors’, which the company was
not able to realise as this money was due and payable by one NB. The assessee
had sent several letters directing the debtor to pay the amount, but the debtor
did not even acknowledge the same. The assessee therefore, wrote off the said
amount as bad debt and claimed deduction u/s.36(1)(vii) of the Income-tax Act,
1961. The Assessing Officer disallowed the claim on the ground that the
conditions for allowance of the bad debt as provided u/s.36(2)(i) have not been
clearly brought out. The Commissioner (Appeals) allowed the assessee’s claim on
the ground that the Assessing Officer has not pointed out that this debt has not
been taken into account in computing the income in any earlier or previous year.
The Tribunal upheld the decision of the Commissioner (Appeals).
On appeal by the Revenue,
the Allahabad High Court upheld the decision of the Tribunal and held as under :
“(i) It was the specific
case of the assessee that the amount represented the sales effected to NB,
but because of the fact that there was no documentary evidence in support of
the claim as also the acknowledgement of the letters, the said amount was
written off. The Assessing Officer did not make any comment on this issue
and instead proceeded on the ground by simply saying that merely because the
amount has become bad the assessee cannot claim to reduce the income and
placed reliance on S. 36(2)(i) of the Act.
(ii) In our opinion, the
Commissioner (Appeals) had rightly observed that the Assessing Authority did
not find any material on record to show that the said amount has not been
taken into account in computing the income of any previous years.
(iii) That being the
position, in our considered opinion, the Tribunal had rightly upheld the
deletion.”
