Bad debt deduction after write-off requires no proof of actual irrecoverability when statutory conditions are met.

After the statutory amendment and the principle in TRF Ltd., a bad debt deduction is available where the debt is written off in the accounts and has been taken into account in computing income, subject to section 36(2). The assessee produced party-wise ledgers and records showing that the amounts arose from earlier credited sales and were later written off as irrecoverable. Actual proof of irrecoverability was not required once the write-off and statutory conditions were satisfied. On the material recorded, the conditions were treated as met and the bad debt claim was allowable.

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Issues: Whether the assessee was entitled to deduction of the amount written off as bad debt under section 36(1)(vii) read with section 36(2) of the Income-tax Act, 1961.

Analysis: The assessee furnished party-wise ledgers and other records showing that the disputed amounts arose from sales already credited in earlier years and were subsequently written off in the books as irrecoverable. The governing principle is that, after the statutory amendment and the law declared in TRF Ltd., the assessee is not required to prove actual irrecoverability if the debt has been written off in the accounts and the debt had been taken into account in computing income, subject to the conditions of section 36(2). The circular issued by the Board also directed that this position be followed. On the material placed on record, the required conditions stood satisfied.

Conclusion: The claim for bad debt deduction was allowable and the disallowance was unsustainable; the issue is decided in favour of the assessee.

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