Case Note & Summary
The Supreme Court addressed appeals concerning the assessment years 1990-1991 and 1993-1994, focusing on the treatment of bad debts under the Income Tax Act, 1961. The court noted that prior to April 1, 1989, an assessee was required to establish that a debt had become irrecoverable to claim a deduction. However, following the amendment, it was sufficient for the debt to be written off as irrecoverable in the accounts. In the present case, the Assessing Officer did not verify whether the debts had been written off in the accounts of the assessee. Consequently, the court remitted the matter to the Assessing Officer for a fresh examination of this aspect. The appeals were disposed of with no order as to costs. A similar order was issued for Civil Appeal No. 5292 of 2003 concerning the assessment year 1994-1995, directing the Assessing Officer to consider the write-off in accordance with the law established in the earlier appeal.
Headnote
A) Income Tax - Bad Debt Write-Off - Requirement of Establishing Irrecoverability - Income Tax Act, 1961, Section 36(1)(vii) - Post amendment, it is sufficient for the assessee to write off the debt as irrecoverable in their accounts without needing to establish its irrecoverability. The court held that the Assessing Officer failed to verify if the debt was indeed written off, necessitating a remittance for de novo consideration (Paras 2-3).
Issue of Consideration
Whether the Assessing Officer examined if the bad debt was written off in the accounts of the assessee.
Final Decision
The Supreme Court remitted the matter to the Assessing Officer for de novo consideration of whether the bad debt was written off in the accounts, with no order as to costs.
Law Points
- Income Tax Act
- bad debt
- write-off
- Assessing Officer's duty
- de novo consideration
