2010 (2) TMI 211 - SC - Income Tax

Bad debts – Section 36(1)(vii) - Assessment Year 1990-1991 and Assessment Year 1993-1994 - Prior to 1st April, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word “established”, which earlier existed in Section 36(1)(vii) of the Income Tax Act, 1961 – held that - in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee – matter remanded for de novo consideration