If a company gave Unsecured Loan(Advances) to Mr. A (not being in pursuance of any business trade agreement i.e. he was not a party to sale or "DEBTOR"). He now turns INSOLVENT. How his account should be written off?? ( I believe it cannot be written off as Bad Debt as it was never taxed as income hence no expense can be claimed henceforth)
Menu
Advanvces Unrecoverable
Replies (3)
it has to be w/off in p&l then only it can be taken out of books
u cant keep it standing in books
however u r view pt.seems to b correct regarding taxation of it but that point will arise later when return will be filed,presently in books entry of w/off will be there whether i.tax accept it or not..........
This Case Laws would support my contention of not passing it through the P &La/c.
CITv/s. Cochin Co. Pvt. Ltd. (1989) 184 itr 230
Mahindra & Mahindra Ltd. V/s. CIT 261 ITR 501 (BOM)
Chetan Chemicals (P) Ltd 267 ITR 770 (Guj)
Hi Eric,
The only way u can write off an account is thru P&L a/c - as a bad debt or a balance w/off.
Your contention as to taxation & caselaws is correct. It is a non-operating bad debt. But u do pass entries for many non-operating exp & incomes thru P&L a/c. There are many such advances given that are not debtors / due to sale, but are incidental to running a business..like advance to supplier or salary advance to employee or advance in nature of loan to employee..if such advances turn out to be bad debts...one has to route them thru P&L a/c.
Recent Threads
- GSat on sale of assets
- 234 f penalty
- GST REGISTRATION FOR CARPENTER WORK
- Standard deduction for family pensioners
- Concerning tax savings or understanding the long-t
- F&O losses
- Is form 10 IE needed in this case?
- TDS on purchase of property more than 50 lakhs
- Withdrawal from post NSS
- Section 10(11) or 10(12) of exempted income
CAclubindia
