Joseph Davaraj Koilpillai Vs ITO (ITAT Bangalore)
Deduction on account of bad debt as allowed u/s 36(1)(vii) read with section 36(2), after amendment by the Direct Tax Laws (Amendment) Act 1987, envisage merely wiring off the debt as irrecoverable in the accounts of the assessee as a condition for such an allowance. Before the amendment by the DTL (Amendment) Act 1987, of course, there was a condition to establish that the debt has become bad.
The Hon’ble Supreme Court in the case of T.R.F. Limited vs C.I.T reported in 323 ITR 397(SC) has clearly observed that after 01.04.1989, 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.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order of CIT(Appeals)-7, Bengaluru dated 20.09.2018 in relation to assessment year 2014-15.
2. The only issue that arises for consideration in this appeal by the assessee is as to, whether the revenue authorities were justified in rejecting the claim of assessee for deduction of a sum of Rs.88,59,511 on account of bad debts written off.
3. The assessee is an individual carrying on business of project management and consultancy services under the name and style ‘Elhanan Management Services’. For the AY 2014-15, the assessee filed return of income declaring total income of Rs.4,07,450.
4. In the course of assessment proceedings the AO noticed that in arriving at the income from profession, the assessee claimed deduction of Rs.88,59,511 on account of bad debts written off. The details of bad debt written off as bad debts and shown as income of the assessee in his books of account in the earlier Assessment years as furnished by the Assessee before the Revenue authorities was as follows:-
