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Taxation

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(Querist)
03 February 2016 Bad debt recovered (not allowed as deduction in earlier year) is deducted in PROFITS AND GAINS OF BUSINESS AND PROFESSION ?
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CA CMA CS Ram Pavan Kumar Melam

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CA CMA CS Ram Pavan Kumar Melam (Expert)
04 February 2016 As per the information you provided, it is a simple recovery of debtors. If recovery of bad written off earlier as per section 36(1)(vii), the same shall be deemed to be profits and gains of business or profession as per section 41(4).
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CA CMA CS Ram Pavan Kumar Melam

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CA CMA CS Ram Pavan Kumar Melam (Expert)
04 February 2016 As per section 41(4), if in any previous year, the debt becoming bad is written off and a deduction was claimed and allowed and later on the amount was recovered, the same shall be treated as PGBP in the year of recovery;

However, if the part of the debt was claimed and allowed as bad debt and the balance amount kept as recoverable (shown as debtors) and subsequently if any recovery is there against this portion of debtors, the same shall be treated as simple recovery of debtors.
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