Bad debt write-off in books: profit and loss debit with corresponding accounting entries can satisfy the statutory requirement.

A genuine write-off of bad debts in the assessee's books satisfied Section 10(2)(xi) of the Income-tax Act, 1922. The court treated debts shown as irrecoverable as sufficiently written off where the assessee debited the profit and loss account and made corresponding entries to suspense or doubtful-debts accounts. It was not necessary in every case to close each individual debtor's account by direct credit. The operative requirement was that the books must reflect an actual, bona fide write-off, which was found to have been done. The question was answered in the affirmative in favour of the assessee.

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Issues: Whether bad debts aggregating Rs. 66,483 were actually written off in the assessee's books within the meaning of Section 10(2)(xi) of the Income-tax Act, 1922.

Analysis: The amount claimed represented debts found to be irrecoverable. The statutory requirement was that the amount must be actually written off as irrecoverable in the books of the assessee. The assessee debited the profit and loss account and credited the amounts to appropriate suspense or doubtful-debts accounts. The requirement of the section was held to be satisfied by a genuine write-off in the books, and it was not necessary that the individual debtor accounts must in every case be closed by direct credit. A debit to the profit and loss account, supported by corresponding accounting entries showing the debts as written off, was sufficient.

Conclusion: The bad debts were actually written off in the assessee's books, and the question was answered in the affirmative in favour of the assessee.

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