Book write-off evidentiary sufficiency: written-off debts treated as bad debts for tax purposes when no contrary evidence.

The note addresses entitlement to bad-debt deduction where inter-company amounts recorded as reimbursable costs were written off in the assessee's books with board approval; it clarifies that such book write-offs, supported by contemporaneous corporate records and uncontradicted by the tax authorities, suffice as evidence of irrecoverability and justify deletion of assessed additions. The operative effect: additions based on mere surmise or conjecture cannot be sustained and the write-off qualifies for deduction absent contrary proof.

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Issues: Whether the addition of Rs.121.48 crores made by the Assessing Officer and confirmed by the Commissioner (Appeals) in respect of amounts written off in the assessee's books as due from its subsidiary Airline Allied Services Ltd. could be sustained as not being bad debts / not being wholly and exclusively for the assessee's business for A.Y. 2009-10.

Analysis: The Tribunal examined the nature of the transactions between the assessee and its subsidiary, noting that the amounts related to reimbursable costs and expenditures incurred by the subsidiary and that similar transactions occurred in the previous year. The assessee's audit committee recommended and the board approved the write-off on 24/11/2007, and the amounts were written off in the assessee's books. The Assessing Officer and the Commissioner (Appeals) did not produce evidence to controvert the factual record showing the write-off or to demonstrate that the debts were not recoverable. The Tribunal relied on settled legal principles that a debt written off in the assessee's books as irrecoverable need not be independently proved as bad debt by further evidence, and that additions cannot be made on the basis of mere surmise and conjecture.

Conclusion: The addition of Rs.121.48 crores is deleted and the ground of appeal is allowed in favour of the assessee.

Ratio Decidendi: Where amounts are written off in the assessee's books as irrecoverable and the record shows the write-off with no evidence to the contrary, the tax authorities cannot sustain additions on mere surmise; such book write-offs suffice for allowing bad debt deduction under the Income-tax law.

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