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2012 (9) TMI 805 - SUPREME COURTDeduction u/s 36(1)(vii) - bad debts - period prior to 1st April, 1989 - Held that:- Deduction for bad debts required satisfaction of two conditions at the relevant time, namely, that (a) bad debt must be established to have become bad in that year; and (b) bad debt should have been written off in the books of account of that year. In present case, appellant satisfied both the conditions for claiming deduction for bad debt u/s 36(1)(vii) r.w.s.36(2)(i)(b). Firstly, the appellant is a State Public Sector Undertaking; and secondly, the appellant was the promoter of M/s. V Ltd. Assessee in the course of business of promoting industrial development in the State of Kerala, had promoted M/s. V Ltd. As a promoter, it was in a position to find out whether M/s. V Ltd was in a position to carry on business in future. Thirdly, M/s. V Ltd was a typical Public/Private partnership(PPP). None of these aspects have been considered by the Tribunal as well as by the High Court. Lastly, the Reference Application was made in February, 1988; declaration was made in February, 1988, by BIFR that M/s. V Ltd has become a sick Company. Till the end, the Company could not even be revived. It has been wound up. In the circumstances, applying the commercial test and business exigency test, we are of the view that both the conditions u/s 36(1)(vii) r.w.s. 36(2)(i)(b) are satisfied. Deduction thus allowed - Decided in favor of assessee
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