2015 (6) TMI 1179

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....r the Respondent : None (Adj. request rejected.) ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the Revenue is directed against the order of the Commissioner of Income-tax(Appeals) dated 12.12.2013. 2. The ground raised by the Revenue in this appeal is that the Commissioner of Income-tax(Appeals) erred in directing the Assessing Officer to delete the addition of bad debts ....

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....s are doubtful of recovery, he does not straightaway write it off to the profit and loss account as expenditure incurred, but it was taken to the capital account. He passes the entry by debiting drawings account and crediting in the clients outstanding account and because of this method, the amount of clients which are doubtful, does not appear in the sundry debtors account, as it was reduced from....

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.... be satisfied: 36(1)(vii) : If any debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year, has taken into account in computing the income of the assessee of the previous year, in which it is written off or of in an earlier previous year or if it represents money lent in the ordinary course of business or money lending business which is carr....

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.... fact, legal requirement is that the amount of bad debt must have gone into the computation of the assessee's income. Thus, in the case of a trader, if the sales have been made on credit and corresponding debt becomes irrecoverable, the said debt can be allowed as bad debt, as sales have gone into the computation of the assessee's income. In the instant case, there is no material to suggest that t....