bad dabts

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vicky grewal (Querist)

26 September 2010 the assesse mr. x ,wrote off the amount due to him from mr y gor good supplied 4 year back in course of business. his claim for deduction of bad debts is resisted by the revenue on ground that the assessee has still show that the impugned debt had turend bad and that mere writing off the bad debt is not sufficent.is the said contention correct?

CA Suraj Lakhotia

CA Suraj Lakhotia (Expert)

26 September 2010 The debt has to be written off in the books of accounts and the same will be available as deduction. There are a number of case laws where it has been held that debt written off as bad is an allowable deduction.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

26 September 2010 By virtue of Direct Tax laws (Amendment) Act,1987, w.e.f 1/4/1989, the assessee need not establish that the debt has become bad meaning thereby that mere writing off in the books of accounts is enough to allow deduction under section 36(1)(vii) of the Income tax Act,1961.

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