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2014 (12) TMI 213 - AT - Income TaxDeductions on bad debts disallowed – Held that:- Relying upon TRF Ltd. vs. CIT [2010 (2) TMI 211 - SUPREME COURT] wherein the AO was directed to verify whether the debt has been written off in the accounts of the assessee or not - the accounts of the assessee culminate in P&L account and balance sheet - The claim of bad debts is not reflected in P&L account whereas any account relating to expense or loss has to be debited to P&L account - Since there is no debit of bad debts in the appellant's P&L account it cannot be said that the claim was written off in the accounts - assessee contended that the finding of CIT(A) that there was no break-up extra-ordinary and exceptional items in the Audit Report is ex-facie incorrect - assessee further contended that the notes contain the complete details of the amount debited as exceptional and extra-ordinary items in the profit and loss - the only reservation of the AO is that the appellant has shown the amount of bad debts written of under the head of exceptional and extra-ordinary items in the P&L A/c and thereby has debited only ₹ 33,25,76,167/- in the profit and loss account that too in the profit and loss appropriation account. The provisions of section 36(1)(vii) do not contain the requirement of writing off the bad debts to the profit and loss account of the Assessee what the provision mandates that the amount of any bad debt or part thereof should be written off as irrecoverable in the Accounts of the Assessee for the previous year - assessee emphasized that the provision requires writing off in the accounts of the assessee not in the profit and loss account, the ledger accounts of the parties form part of the accounts, maintained by the assessee - Therefore, the requirements of Section 36(1)(vii) are duly complied with – the contentions of assessee is upheld and the findings of CIT(A) is set aside and the matter is remitted back to AO for verification – Decided in favour of assessee.
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