Whether writing of bad debts in accounts sufficient to claim deduction u/s 36(1)(vii) of IT Act 1961

Last updated: 19 January 2023

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The Delhi High Court, following a Supreme Court ruling, has clarified that for an assessee to claim a deduction for bad debts under Section 36(1)(vii) of the Income-tax Act, 1961, it is no longer necessary to prove that the debt has actually become irrecoverable. It is sufficient if the assessee has written off the debt as irrecoverable in their accounts.

Court :
Supreme Court of India

Brief :
he position in law is well-settled. After 1.4.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. When a bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from Sundry Debtors.

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FCS Deepak Pratap Singh

Associate Vice President - Secretarial & Compliance (SBI General Insurance Co. Ltd.)

Dear Friends, MyselfFCSDeepak P. Singh ( B.Sc.. LLB, FCS. FIII, CIAFP, CRMP, ID) , A Fellow Member of ICSI, Law Graduate ,Fellow Member of Insurance Institute of India, Certified Independent Director ,Certified Insurance Anti Fraud Professional , Certified Risk Governance Professional ( ICSI-III) and cleared Limited I ... Read more

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