TMI Blog2011 (2) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... uld, therefore, not be attracted - Tribunal has recorded a finding of fact to the effect that the requirements of clause (vii) of sub-section (1) of section 36 as well as the requirement of section 36(2) of the Act have been duly fulfilled in the present case - Decided in favor of the assessee - 20 of 2000 - - - Dated:- 25-2-2011 - HARSHA DEVANI MS., ANTANI H. B. JJ. JUDGMENT Ms. Harsha Devani J.- 1. By this appeal under section 260A of the Income-tax Act, 1961 (the Act), the appellant-Revenue has challenged the order dated August 20, 1999, made by the Income-tax Appellate Tribunal ("the Tribunal"). 2. While admitting the appeal on November 13, 2000, the court had formulated the following substantial questions of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld outstanding balance of the earlier years. It was pointed out that till date, not a single amount had been received from any of the said parties. The Commissioner (Appeals) observed that from the list of debtors, it was obvious that they were mostly Government departments or public undertakings and that the assessee was receiving payments from the said departments regularly even at that stage. In view of the aforesaid facts, the Commissioner (Appeals) held that the claim of the assessee for writing off the said amount as bad debts could not be accepted and confirmed the addition. 4. The assessee carried the matter in second appeal before the Tribunal. The learned counsel for the assessee drew the attention of the Tribunal to the ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requisite statutory conditions for claiming deduction of bad debts as contained in section 36(1)(vii) as well as section 36(2)(iii) were fully satisfied and as such, there was no reason for disallowing the claim of bad debts made by the assessee. 5. Mrs. Mauna Bhatt, learned senior standing counsel appearing on behalf of the appellant submitted that the Tribunal had erred in holding that allowing the assessee's claim for bad debts of Rs. 2,70,656 as merely writing off in the books was not sufficient and what had to be written off should actually have been a bad debt. Attention was invited to the provisions of section 36(2)(iii) of the Act, to submit that the requirements of the said provision have not been fulfilled in the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year." 8. Thus, in the light of the provisions of clause (vii) of sub-section (1) of section 36, the assessee is entitled to deduction of the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. In view of the provisions of clause (i) of sub-section (2) of section 36, no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year until the amount of such debt and part thereof is written off or of an earlier previous year or represents money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from 1st April, 1989, deduction provided under clause (vii) of sub-section (1) of section 36 of the Act was in respect of the amount of any debt or part thereof which is established to have become a bad debt in the previous year, subject to the provisions of sub-section (2). In the light of the amendment in clause (vii) of sub-section (1) of section 36, the requirement of establishing that the debt has become a bad debt has been done away with. Thus, clause (iii) of sub-section (2) of section 36 of the Act appears to have been inserted to take care of the situation where on an earlier occasion a claim for deduction in respect of a bad debt has been disallowed on the ground that the assessee had not established that it had become a bad debt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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