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2020 (3) TMI 343 - HC - Income TaxAllowance of bad debts on account of inter corporate debt and advances u/s 36(1)(vii) read with Section 36(2) - assessee company is not a banking company or engaged in the business of money lending? - HELD THAT:- Comparing the provision of Section 36(1)(vii), pre 1.4.1989 and post 1.4.1989, Supreme Court held that the position in law has become well settled. After 1.4.1989, it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. This Court in CIT Vs. Shreyas S. Morakhia [2012 (3) TMI 103 - BOMBAY HIGH COURT] also considered a claim of share broker assessee to deduction by way of bad debts under Section 36(1)(vii). This Court referred to the decision of the Supreme Court in T.R.F. Ltd (supra) and held that under Section 36(1)(vii) of the Act, the amount of any bad debt or any part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year is to be allowed as deduction in computing income under Section 28 of the Act. Thus, it is a settled position in law that after 1.4.1989, it is not necessary for the assessee to establish or prove that the debt has in fact become irrecoverable but it would be sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. This is because, as held by this Court, decision to treat a debt as a bad debt is a commercial or business decision of the assessee. Recording of a debt as a bad debt in his books of accounts by the assessee prima facie establishes that it is a bad debt. If the Assessing Officer disputes that the onus would be on him to prove otherwise. Tribunal recorded from the materials on record that admittedly, the debt in question had been written off as irrecoverable in the accounts of the assessee. If that be the position, then there is compliance to the requirement of Section 36(1)(vii) of the Act and the amount covered by the bad debts would be entitled to be deducted vide computing income under Section 28 of the Act. Further, it is not necessary, rather there is no requirement under the Act that the bad debt has to accrue out of income under the same head i.e 'income from business or profession' to be eligible for deduction. This is not a requirement of law. All that is required is that the debt in question must be written off by the assessee in its books of accounts as irrecoverable. - Decided against revenue
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