FBT on bad debts

In May 08' a pvt. ltd. co. issued a cheque of Rs.50 lac to an individual (an outsider but  very important person for business point of view). No documents were signed as that person had promised to return the money with in a month. Now months are gone but that person is not in a position to return the money. He says he will return the money in  future but refuses to sign any document. My questions are :-

What should be the accounting entry ?

What should be the tax treatment ?

How and when can it be claimed as bad debts ?

Replies (2)

Pawan

It is a practical problem & very tough to resolve.... I suggest you to consult some highly expert FCA.

thanks / Amit Mittal

Unless the purpose is known no one will be able to suggest accounting entry.

The allowance regarding tax allowance depends upon the ability of the company to show the business connection.

To claim it as a bad debt the most important step is to first establish that it indeed was a debt. Then you have to substantiate it has become bad. Last, it should be written off, after the first two steps are clearly established.

 

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