Allowability of provision
This query is : Resolved
09 November 2011
In Assessment year 1997-98, we had made a provision for doubtful Advances in the books of Accounts. The same had already added back in the total income for the same A.Y.
Now in current assessment year, we have to write back the said doubtful provision.
So my question is, whether the said expenditure is allowable as deduction u/s 36(1)(Vii) of the income tax act.
Please clarify the same.
Now in current assessment year, we have to write back the said doubtful provision.
So my question is, whether the said expenditure is allowable as deduction u/s 36(1)(Vii) of the income tax act.
Please clarify the same.
09 November 2011
Deduction U/s 36(1)(vii) is allowable in case of Bad Debts is written off.
Only on the basis of creating and writing off of provisions do not allow the assessee to claim the expenditure.
.
The most important thing about bad debt is
it should be a debt. An advance may not be a debt, when it is not covered under the normal business of the assessee.
.
Long Back in 1997-98, when you have created provision , then it was done by debiting the P&L A/c.
.
Now it can be reversed only by making a reverse entry in Credit of P&L.
.
As it is not a income, you can deduct it
from your Net Profit while computing the business income.
Only on the basis of creating and writing off of provisions do not allow the assessee to claim the expenditure.
.
The most important thing about bad debt is
it should be a debt. An advance may not be a debt, when it is not covered under the normal business of the assessee.
.
Long Back in 1997-98, when you have created provision , then it was done by debiting the P&L A/c.
.
Now it can be reversed only by making a reverse entry in Credit of P&L.
.
As it is not a income, you can deduct it
from your Net Profit while computing the business income.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- TDS 194-T applicability
- Fixe term employment
- Is any professional CA is here please reply
- GST ITC REVERSE
- Regarding Applicability of Tax Audit u/s 44AB
- Foreign lottery ticket bought online from India: legality, tax and consequences
- Reprocessing of rectification order AY 2025-26
- Section 50-fixed asset-->building ceases to exist
- TDS on TRUST
- Consolidated financials
- Withdrawal in cash from partners capital account by partner
- Regime change
- Goods sold but invoice not issued
- Tally: Imported bank entries do not show up in manual reconciliation
- Sales of goods of amount Rs97 lakhs to a party
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- STATUTORY AUDIT OF A SMALL PRIVATE COMPANY INCORPORATED ON 28.03.2025
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
