14 August 2010
Dear Experts, Want to know as per Limitation Act...how many years should it take to write-off sundry debtor or sundry creditor balance? Is it 3 years or 5 years? With regards, Rajesh.
14 August 2010
For income tax purpose,to write off a debt, Limitation Act need not be considered by virtue of the amendment in section 36(i)(vii) with effect from 1/4/1989. Accordingly, assessee's are not required to prove that a debt has become bad meaning thereby that they need only to write off a debt as irrecoverable in their accounts so as to claim 36(1)(vii). Citation : -CIT Vs. Autometers Ltd (2008) 167 Taxman 286 (Delhi)
14 August 2010
and also in this judgement by the Bobay high court The Assessing Officer disallowed the claim of bad debt which was written off by the assessee. But the learned CIT(A) deleted the said disallowance. Further, the Hon’ble ITAT confirmed the said deletion. On appeal by the Department in High Court, the Court held that the provisions of section 36(1)(vii) of the Income-tax Act, 1961 were to be read with the Board Circular No. 551 dt. 23-1-1990 and if the assessee had written off the debt as a bad debt, that would satisfy the purpose of the section. The High Court dismissed the appeal. CIT vs. Star Chemicals (Bombay) P. Ltd. (2009) 313 ITR 126 (Bom.)
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