provision related to sec36(2) related to bad debts

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CA Manoj Pokharana (Querist)
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27 June 2009 ABC ltd. is loss making company for a.y.06-07 they have claimed the bad debt of last several year i.e. 10-12 year While scrutiny of the same A.O. has disallowed the cliam of bad debts & the s assessee is now gone to CIT Appeal aginst the disallowance of the bad debts. so kindly clarify the Provision relating to bad debts of Income Tax ACT & as per companies ACT. also specify case law in favour of the assessee regarding the same.

Sanjeev Jain

Sanjeev Jain (Expert)
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27 June 2009 Hie Manoj

See as per section 36(2) Bad debts can be claimed deduction only if two conditions are satisfied : -

01. Bad debts entry have been written off in the books of accounts with the respective Debtors.
02. Debts have been created through entry credited in the profit and Loss Account in the past.

if above mentioned conditions are satisfied then you will be eligible to claim deduction for the same. AO has no authority to denied the spirit of Law.

You can take the stand of following judgment: -
01. P.K.Kaimal V. CIT or
02. Veerbhadrarao V. CIT
These are the judement where bad debts related issue have been sort out by the hon'able SC.