ITAT allows deduction of bad debts under Income Tax Act The ITAT allowed the deduction of bad debts for the assessee under sections 36(1)(vii) and 36(2) of the Income Tax Act, 1961. The Tribunal considered the ...
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ITAT allows deduction of bad debts under Income Tax Act
The ITAT allowed the deduction of bad debts for the assessee under sections 36(1)(vii) and 36(2) of the Income Tax Act, 1961. The Tribunal considered the debts were written off in the books of accounts during the relevant year, following the precedent set by the Supreme Court in TRF Ltd. vs. CIT. The appeal was allowed in favor of the assessee, overturning the decisions of the AO and the CIT(A), who had disallowed the claim for deduction of bad debts.
Issues involved: Claim for deduction of bad debts u/s 36(1)(vii) r.w.s. 36(2) of the Income Tax Act, 1961.
Summary:
The Appellate Tribunal ITAT Ahmedabad heard an appeal by the assessee against the order of the ld. C.I.T. (A)-XI, Ahmedabad, regarding a claim for deduction of Rs. 11,81,505/- on account of bad debts. The assessee, a trader in medicines and pharmaceutical drugs, had filed a return declaring income of Rs. 10,46,635/- which was selected for scrutiny. The Assessing Officer disallowed the claim for bad debts as the assessee did not establish that the debts had become bad, citing relevant case law.
On appeal, the Ld. C.I.T.(A) upheld the AO's decision stating that the appellant failed to provide evidence that the debts had become bad, as the appellant maintained contacts with the clients through regular business transactions. The addition made by the AO was confirmed.
The assessee appealed to the ITAT against the findings of the ld. CIT(A), and both parties agreed that the issue was covered by the decision of the Hon'ble Supreme Court in TRF Ltd. vs. CIT. The ITAT, considering the Supreme Court's decision, allowed the claim for deduction of bad debts as the debts had been written off in the books of accounts during the relevant year, in accordance with the provisions of sec. 36(1)(vii) r.w.s. 36(2) of the Act. No other arguments were presented, and the appeal was allowed.
In conclusion, the ITAT ruled in favor of the assessee, allowing the deduction of bad debts u/s 36(1)(vii) r.w.s. 36(2) of the Income Tax Act, 1961.
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