Case Law Details
PCIT Vs Hybrid Financial Services Ltd (Bombay High Court)
Under Section 36(1)(vii) of the Act, the amount of any bad debt or any part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year is to be allowed as deduction in computing income under Section 28 of the Act.
It is a settled position in law that after 01.04.1989, it is not necessary for the assessee to establish or prove that the debt has in fact become irrecoverable but it would be sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. This is because, as held by this Court, decision to treat a debt as a bad debt is a commercial or business decision of the assessee. Recording of a debt as a bad debt in his books of accounts by the assessee prima facie establishes that it is a bad debt. If the Assessing Officer disputes that the onus would be on him to prove otherwise.
If that be the position, then there is compliance to the requirement of Section 36(1)(vii) of the Act and the amount covered by the bad debts would be entitled to be deducted vide computing income under Section 28 of the Further, it is not necessary, rather there is no requirement under the Act that the bad debt has to accrue out of income under the same head i.e ‘income from business or profession’ to be eligible for deduction. This is not a requirement of law. All that is required is that the debt in question must be written off by the assessee in its books of accounts as irrecoverable.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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