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2017 (4) TMI 602 - AT - Income TaxClaim for bad debt written off u/s 36(1)(vii) - Held that:- In relation to the decision for write off, viz the relation with the concerned trade customer on an ongoing basis; the cost - direct or indirect, of recovery, etc In fact, but for it becoming irrecoverable, there was no question of any loss to the assessee, being a debt due from the Government Rather, being due from the Government, but for the law, a claim for bad debt in its respect would ordinarily invite an objection, being almost a contradiction The irrecoverability is thus an integral aspect of the claim for bad debt written off u/s 36(1)(vii) and, thus, nothing turns on the irrecoverability having set in on the lapse of the stipulated time period for its recovery If nothing, it only proves the claim to be genuine and bona fide The impugned claim is thus only qua a bad debt liable for deduction u/s 36(1)(vii) and not qua a loss u/s 28 of the Act In view of the foregoing, the assessee shall therefore be entitled to the impugned loss subject to the satisfaction of the conditions of s 36(1)(vii) That is, the relevant debt/s: a) must have become irrecoverable, i.e., the 180 day period expired qua the same as at the year-end; b) must be written off in accounts for the relevant year The matter, accordingly, is restored to the file of the AO, who shall per a speaking order give effect to this order after allowing the assessee a reasonable opportunity to exhibit it’s case The assessee shall also reconcile the difference between the amount claimed ( ₹ 25.44 lacs) and that for which the order stands passed by the VAT authority ( ₹ 23.91 lacs) Further, to the extent not written off, the claim in its respect would have to necessarily await the same, i.e., a write off in accounts, a condition precedent for a claim qua the same, and which shall incidentally also ensure that there is not double claim qua the same sum.
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