Section 41(4) Income Tax Act: Recovered bad debts taxable as business income; not applicable to successors in business succession.

Section 41(4) of the Income Tax Act addresses the recovery of bad debts previously deducted under section 36(1)(vii). If the recovered amount exceeds the deducted amount, the excess is taxable as business income in the year of recovery, regardless of whether the business still exists. The key criterion is the identity of the assessee, not the business's continuity. In cases of business succession through amalgamation, demerger, or inheritance, the recovered bad debt is not taxable as business income for the successor if the deduction was allowed to the predecessor.