TMI Blog1953 (9) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act. 2. One of the grounds of appeal related to a claim of bad debts in respect of two items, Rs. 57,358 and Rs. 9,125. The Income-tax Officer rejected the claim of the assessee. He wrote : " The assessee has debited Rs. 57,358 and Rs. 9,125 to the profit and loss account and credited to Sukhbawd Lena account and Shah account (doubtful debts and suspense account) stating that the debts being doubtful of recovery have been written off to the profit and loss account. The individual accounts have however been carried forward. Thus it is nothing but a reserve for bad and doubtful debts and as such cannot be allowed as deductions from the profit. " The Appellate Assistant Commissioner agreed with the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account style " doubtful debts and suspense account. " The amount of these debts was credited to this account and a corresponding debit given to the profit and loss account. The department's contention before the Tribunal was that, unless the personal accounts of the debtors are credited and closed, there can be no writing off the debts. The Tribunal disagreed with that view. In the opinion of the Tribunal, the writing off must be to the debit of the profit and loss account. The order of the Tribunal is annexure " A " and forms part of the case. 5. " Writing off " is a technical term used by financiers and auditors. There are two methods of dealing with a debt which has been written off in the books of account, (1) by giving the correspon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department before the Tribunal was that they had not been written off as required by the section and therefore they were not permissible deductions. Now, what Section 10(2)(vi) requires is that the amount must be actually written off as irrecoverable. What the assessee did in this case was that he debited two amounts of Rs. 57,358 and Rs. 9,125 to the profit and loss account. Rs. 57,358 was credited to Asami Sughbawd Lena account, which means persons who have become insolvent or who have failed to pay and the entry itself shows that inasmuch as these persons had failed in the forward business these amounts were being debited to the profit and loss account and credited to this Ashami Khad Khata account. The other item of Rs. 9,125 was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has done in this case in respect of both the items which he has debited to the profit and loss account. In respect of one, viz., Rs. 57,358, he has credited it to Ashami Khad Khata account, which means a person who is civilly or financially dead and in respect of other, viz., Rs. 9,125, he has credited it to the Shah account which is a suspense account. Sir Nusserwanji further forgets that Section 10(2)(xi) does not require that the amount should be written off in the account of the debtor. What the section requires is that the amount should be written off in the books of the assessee and there could not be the slightest doubt that looking to the books of the assessee the amount has been written off. There is no more striking or significa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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