9911796707
TMI Blog2011 (2) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debt of Rs. 2,70,656 merely on the entry in the account books and on the basis of the provisions contained in section 36(1)(vii) read with section 36(2)(iii) of the Income-tax Act, 1961 ? 2. Whether the aforesaid provisions of section 36(1)(vii) read with section 36(2)(iii) would exclude completely and obviate any enquiry with regard to an entry in the account books in respect of bad debt ?" 3. The assessment year is 1989-90 and the relevant accounting period is the year ended on March 31, 1989. The controversy relates to disallowance of bad debt of Rs. 2,70,656. The assessee claimed bad debt of Rs. 5,67,362. The Assessing Officer disallowed the claim of bad debt to the extent of Rs.2,70,656 on the ground that two of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions relating to deduction of bad debts, viz., section 36(1)(vii) and 36(2)(iii) to submit that for claiming deduction of bad debts, two conditions were required to be satisfied. Firstly, the amount of bad debt had to be written off in the accounts of the assessee for the previous year ; and, secondly, the debt should have been taken into account in computing the income of the assessee of the previous year in which the amount was written off or an earlier previous year. The Tribunal upon appreciation of the evidence on record noted that the fact that the assessee had written off the debts in question in the books of account during the previous year was not disputed. According to the Tribunal, once the assessee had posted entries in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad. 6. This court has also heard Mr. Kirtikant Thaker, learned advocate for the respondent-assessee who has supported the impugned order passed by the Tribunal. 7. Section 36 of the Act provides that in computing the income referred to in section 28, deductions provided for the clauses thereunder shall be allowed inrespect of the matters dealt with thereunder. Clause (vii) thereof provides for 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, subject to the provisions of sub-section (2). Sub-section (2) of section 36 in so far as the same is relevant for the present purpose reads thus : "(i) no such deduction shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the facts of the present case, the 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. On behalf of the Revenue, reliance has been placed upon clause (iii) of sub-section (2) of section 36 to contend that the assessee is required to establish that a debt has become bad in that year. On a plain reading of clause (iii) of sub-section (2) of section 36, it is apparent that the same would be attracted in a case where a debt or part of such a debt is written off as irrecoverable in the accounts of an earlier previous year being a previous year relating to the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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