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of <h1>Guidance on Bad Debt Allowance for Textile Mills u/s 36(1)(vii) of the Income-tax Act, 1961.</h1> The circular addresses the allowance of bad debts under Section 36(1)(vii) of the Income-tax Act, 1961, particularly concerning textile mills taken over by State Textile Corporations due to financial distress. It clarifies that while debts owed by these mills are not automatically considered bad, they may be classified as doubtful and potentially eligible for deduction. The circular instructs Income-tax Officers to assess claims for bad debt deductions sympathetically, considering the mills' financial status and recovery prospects. It emphasizes that the provision covers doubtful debts, aligning with previous legislation under the Income-tax Act, 1922.
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