TaxTMI 
TaxTMI 
TaxTMI 
Bad debts - Whether claims of banks should be automatically allowed in their entirety in their assessments under clause (vii) of sub-section (1)
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....the Board on representations made from the Indian Chamber of Commerce, Calcutta and the Indian Banks Association itself. It was decided that it was not possible to accept the suggestion that the bad debts claimed by banks should be automatically allowed in their entirety in the assessments of the banks. The legal position was explained at that time in the replies issued by the Board to the Indian Chamber of Commerce and to the Indian Banks Association. Copies of these letters [CBR Circular No. 27(19)-IT/49, dated 2-9-1949 and CBR Circular No. 27(19)-IT/49, dated 22-3-1950 with Annexures] are enclosed for information [Annex I and Annex II]. Circular : No. 20 [F. No. 10/11/69-IT(A-II)], dated 13-6-1969. ANNEX I - CIRCULAR DATED 2-9-1949 REF....
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....ers under section 10 of the 1922 Act, however, allow relief only in respect of such bad debts as in their estimate are irrecoverable to the extent of the amount written off. Doubtful debts are, therefore, automatically excluded from the relief. Further, Income-tax Officers, it is stated, insisted on the following information : (1) how old the debt is? (2) how it became bad? and (3) when it became bad? As the Government are aware, banks generally write off bad debts from the current years revenue without touching the reserve fund and, therefore, it may not be possible to write off all bad debts in a single year. The banks continue to make provision each year and at suitable opportunity bad debts are written off. It is stated that Income-tax....
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.... the Banking Companies Act, banks are required to write off or provide for all doubtful or bad debts, the Income-tax Act penalises the banks for doing so. In the opinion of the Committee this anomaly should be removed and the Income-tax Act should allow full relief to banks in respect of all bad and doubtful debts actually written off or in respect of which provision is made in the books of the bank. Banks being public limited companies, their books are audited by registered accountants and auditors and their officers appointed by the Board. Therefore, there is hardly any justification for placing public banks in the same category as private money-lenders. The Central Board of Revenue must be aware that even after writing off the debts as a....
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....n our letters, however, we have not referred to auditors and any action by them. We have referred to a certificate from the board of directors of the banking company concerned and that is, of course, a different matter. letter DATED 7-2-1950 REFERRED TO IN ABOVE letter I am directed to thank you for your kind reply No. 27(19)-IT/49, dated 19-1-1950. Our association has gone through it very carefully and has requested me to point out that my letter No. 670 of 20-10-1949 last was written with the sole object of requesting the Honble Central Board of Revenue to issue instructions so that the time of the Income-tax Officers as well as of public banking companies in calling for elaborate details as regards each and every irrecoverable loan wri....