TMI Blog2024 (2) TMI 1342X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is entitled to deduction in respect of the amount of bad debt or part thereof which is written off as irrecoverable in the account of assessee in the previous year. In our view, it is not necessary that assessee should establish that the debt has gone bad during the previous year relevant to the assessment year in question. If assessee could show that it bona fidely believed that the debt had gone bad and the claim could be made, it is to be allowed for the year in which it is written off in the books of accounts. One of the reasons the AO has disallowed the claim of assessee is that assessee is not a money lender and hence, it could not be said that the amount advanced had become bad. We agree with the ITAT that it is not necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(3) of the Act came to be passed assessing total income at Rs. 2,93,20,841/-. 3. Assessee challenged this assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)] and the appeal was partly allowed. Assessee carried the matter further by filing an appeal before the ITAT. The ITAT held that the assessee had substantiated the claim of deductibility under Section 37(1) of the Act, whereas it was Revenue s case that it was a mere advance of Rs. 1,22,440/- to one M/s. Ganges Soaps Pvt. Ltd. and there was no evidence that any services were rendered by them. The ITAT also held that assessee was entitled for deduction as bad debts under Section 36(1)(vii) read with Section 36(2) of the Act a sum of Rs. 2.60 Crores. The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendment w.e.f. 1.4.1989 reads as under : 36(1) - Subject to the provisions of sub-section (2) the amount of any debt or part thereof which is established to have become a bad debt in the previous year. 7. Therefore, the position before the amendment was that assessee could claim deduction in respect of the bad debt or part thereof which is established to have become bad in the previous year relevant to the assessment year in which the claim is made, whereas the position after the amendment is that assessee is entitled to deduction in respect of the amount of bad debt or part thereof which is written off as irrecoverable in the account of assessee in the previous year. In our view, it is not necessary that assessee should e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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