By K. B. Bhujle, Advocate
New Page 1
I. Unreported :
32 Business deduction : Bad debts : S.
36(1)(vii) of Income-tax Act, 1961 : After amendment w.e.f. 1-4-1989 writing off
of bad debt in account is sufficient for allowing deduction. It is not necessary
to prove that debt has become bad.
[CIT v. M/s. Star Chemicals (Bombay) P. Ltd. (Bom.);
ITAL No. 1915 of 2007; Dated 27-2-2008]
The following question was raised before the High Court in
the appeal filed by the Revenue u/s.260A of the Income-tax Act, 1961.
“Whether on the facts and in the circumstances of the case
and in law, the Tribunal is right in confirming the order of CIT(A) in
deleting the disallowance of Rs.79,27,211 on account of bad debt despite the
debt has not become bad ?”
The Bombay High Court held as under :
“The issue arises from the amendment to S. 36(1)(vii) of
the Income-tax Act. Subsequent to the amendment the Board has issued Circular
551, dated 23-1-1990. The issue pertained to bad debt in para 6.6. The
relevant portion of the direction reads as under :
“In order to eliminate the disputes in the matter of
determining the year in which a bad debt can be allowed and also to
rationalise the provisions, the Amending Act, 1987 has amended clause (vii) of
Ss.(1) and clause (i) of Ss.(2) of the Section to provide that the claim for
bad debt will be allowed in the year in which such a bad debt has been written
off as irrecoverable in the accounts of the assessee.”
It is thus clear from the reading of the Section itself and
the Circular that if the assessee has written off the debt as bad debt, that
would satisfy the purpose of the Section. Considering the law as stated in so
far as the view taken by the Tribunal cannot be faulted.”
