Bad Debt Deduction Allowed as Effective Write-Off Need Not Close Debtor Account

Madhusudan Babubhai Kocha Vs ACIT (Bombay High Court) The Bombay High Court held that an assessee is entitled to claim deduction for bad debts under Section 36(1)(vii) of the Income Tax Act even after the insertion of the Explanation effective from 1 April 1989, where the debt has been effectively written off through accounting entries and circumstances establish its recoverability. The assessee had debited the disputed amount to the Profit and Loss Account, made corresponding ledger entries, and initiated recovery proceedings against the debtor. The Court observed that although the individual...