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2008 (8) TMI 894 - HIMACHAL PRADESH HIGH COURTDeduction on bad debt - word "established" - Whether even after the amendment to s. 36(1)(vii) which after amendment provides that deduction on account of bad debt should be allowed once the same is established to have been written off in the books of accounts without proving anything else, the Tribunal was correct in law in upholding the disallowance on the ground that the assessee appellant had failed to prove that the debt had become irrecoverable? - HELD THAT:- It is apparent that prior to amendment, the assessee could claim deduction on account of bad debt, only if it was established that any debt or part thereof had become a bad debt in the previous year. The legislature in its wisdom chose to amend the Act and the amended provision is absolutely clear that once the assessee writes off any bad debt or any part thereof as being irrecoverable, the assessee is entitled to claim deduction for the same. The word "established" has been deleted from the amended provision. The intention of the legislature is absolutely clear that the assessee is no longer required to establish that the debt is bad. He has only to prove that he has written off the debt in his books of accounts as a bad debt. Once he writes off the debt as being irrecoverable, his claim for deduction cannot be rejected on the ground that debt has not been established to have become irrecoverable debt. In view of the clear-cut language of the Sec. 36(2)(iii) and the distinction between the unamended and amended provisions, there is no manner of doubt that the intention of the legislature was that the assessee was entitled to claim deduction in case he, in his books of account, had written off the debt as a bad debt. In our view the language is crystal clear and brooks of no other interpretation. As per the amended provisions of the IT Act, 1961 once the debt has been written off as a bad debt, it is not the requirement of law that the assessee should establish that the debt has in fact become bad. The reason behind this is that after amendment to s. 36(2), in case the assessee recovers any part of the debt the same is assessable as his income in the year when the debt is recovered. In view of the above discussion, the question is answered in favour of the assessee and against the Revenue. Appeal filed by the assessee is allowed and disposed of accordingly.
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