TMI Blog2015 (6) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT ) has held that it was not necessary for the assessee to show after 1.4.1989 as per amended section 36(1)(vii) of the Act that the debts have in fact become irrecoverable, but only writing off of the same in the accounts by the assessee was enough. It is not in dispute that the assessee has written off debts of ₹ 34,64,718/- as bad in its books of accounts. It has not been disputed that the debt which has been written off by the assessee arose out of sales made on credit in earlier years and the same was shown as receivable by the assessee in last several years. The same balance was brought forwarded from earlier several years and no recovery therein was made in last few years. The write off of the debts in the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tails of debits and credits, steps taken for recovery with proof, complete name and postal address and also PAN of each party. The assessee vide its letter dated 25.8.2004 submitted that it was not in touch with the debtors as they were very old. The assessee submitted that the company has closed its business since October, 1996 i.e. prior to almost nine years. The relation and mutual faith between the company and its debtors and creditors deteriorated each day. The company has written off liabilities no longer required to be paid to the creditors amounting to ₹ 36,90,095/- and has offered the same as income as evident from Schedule-8 forming part of balance sheet. Similarly, the assessee-company has also written off bad debts amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 34,64,718/-. 6. On appeal, the CIT(A) allowed the claim of the assessee. The CIT(A) observed that the assessee-company had written off the liabilities to extent of ₹ 36,91,095/- and has claimed bad debts of ₹ 34,64,718/-. Thus, the assessee has offered income on account of writing off of the creditors, on which it has paid tax, and has claimed ₹ 34,64,718/- as bad debts as in some cases, the assessee has no chance of recovery. The assessee has duly complied with all the conditions as laid down in section 36(1)(vii) of the Act for claiming such bad debts. He also observed that the sales made by the assessee in the earlier years in respect of which the assessee has claimed bad debts have duly been accepted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion from the income. The AO though taxed the liability no longer required written off as income of the assessee, but did not allow deduction for bad debts claimed by the assessee on the ground that the assessee failed to submit the details and also could not show that the debt had in fact become bad. The AO was of the view that even after the amendment made in section 36(1)(vii) of the Act after 1.4.1989, the assessee was required to show that the debts infact have become bad. 9. On appeal, the CIT(A) allowed the claim of the assessee on the ground that the assessee had shown income by way of writing off of the liabilities of earlier years of ₹ 36,91,095/-, and thereby the assessee has shown net income, and therefore, no disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was shown as receivable by the assessee in last several years. The same balance was brought forwarded from earlier several years and no recovery therein was made in last few years. The write off of the debts in the books of accounts by the assessee is prima facie evidence of its becoming bad. The Revenue could not bring any material on record to show that the debt had not become bad or any recovery was made by the assessee. Therefore, we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed and the ground of appeal of the Revenue is dismissed. 13. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on Friday, the 10.4.2015 at Ahmedabad. - - TaxTMI - TMITax - I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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