Taxpayer not required to demonstrate that the debt has become bad debt once it is written off in the books of account: SC

Supreme Court Ruling: After 1 April 1989 the Taxpayer is not required to demonstrate that the debt has become bad debt once it is written off in the books of account

Supreme Court Ruling:

In order to claim a bad debt as a deduction under section 36(1)(vii) of the Income Tax Act (Act) it has been a long drawn controversy between the Taxpayer and the Revenue whether in addition to write-off the debt in the books of account, it is obligatory on the Taxpayer to establish that such debt has become a bad debt, especially after the amendment brought in by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1 April 1989.

This controversy has now been put to rest by the Supreme Court in the case of TRF Ltd. Vs CIT wherein it has been held that after 1 April 1989 it is not necessary for the Taxpayer 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 Taxpayer.

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