Bad debt deduction allowed where recovery efforts failed and the debtor had become defunct with no assets left.

A bad debt deduction was allowable where the assessee showed repeated demands for payment, personal recovery efforts, and evidence that the debtor had closed down, become defunct, and had no assets. The material established that reasonable steps had been taken to realise the outstanding debt and that it was written off only after recovery became impossible. On those facts, the debt was treated as irrecoverable in the relevant accounting year and the deduction was permitted.

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Issues: Whether the assessee was entitled to deduction of the amount written off as a bad debt for the assessment year 1978-79.

Analysis: The assessee produced correspondence demanding payment, showed personal efforts to recover the amount, and placed material indicating that the debtor concern had closed down, become defunct, and had no assets left for recovery. The material established that the assessee had taken all reasonable steps to realise the outstanding debt and had written it off only after recovery had become impossible.

Conclusion: The debt had become irrecoverable in the relevant accounting year and the assessee's claim for bad debt deduction was allowable.

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