ITAT Ruling: Deduction for Bad Debt & Employee Contributions Allowed

The ITAT allowed the deduction of bad debt under sec. 36(1)(vii) r.w.s. 36(2) of the Act, stating that proving irrecoverability is not necessary after April 1, 1989, only that the debt is written off in the accounts. Regarding the disallowed employees' contribution to PF & ESI, the ITAT vacated the disallowance and directed the AO to allow the claim, citing that contributions made before the due date for filing the return of income are allowable under sec. 36(1)(va) read with sec. 2(24)(x) and sec. 43B of the Act.

---

---

Issues involved: Appeal against order relating to deduction of bad debt and disallowance of employees' contribution to PF & ESI.

Deduction of Bad Debt:
The assessee claimed deduction of Rs. 2,08,223/- written off as bad debt, but the AO disallowed it for lack of evidence of recovery efforts. The CIT(A) upheld the disallowance, citing the need to establish badness in the debt. However, the ITAT referred to the TRF Limited case, stating that after April 1, 1989, it is not necessary to prove irrecoverability, only that the debt is written off in the accounts. Relying on this, the ITAT allowed the deduction under sec. 36(1)(vii) r.w.s. 36(2) of the Act.

Employees' Contribution to PF & ESI:
The AO disallowed Rs. 11,393/- for delayed payment of employees' contribution to PF & ESI. The CIT(A) upheld this disallowance, citing conflicting decisions on the matter. The ITAT, however, referred to various judgments, including the Alom Extrusions Ltd case, to establish that contributions made before the due date for filing the return of income are allowable under sec. 36(1)(va) read with sec. 2(24)(x) and sec. 43B of the Act. The ITAT vacated the disallowance and directed the AO to allow the claim.

---