04 August 2011
As per Income tax laws we can write of a business receivable if we have a justified reasons that efforts has been done to recover the amount but could not recover the same .
But is the same applicable to overseas debtors also . suppose a company has exported a shipment but could not recover the money from the overseas buyer after all legal efforts . Can the company book the amount as Bad Debts ?
As per my knowledge, in Act, no bifurecation has been made for writing off domestic and overseas bad debts.
If you have offered sale/receipts of those debtors and if you are not able to get the money, you can write off that amount as bad debts. There are so many case laws allowing bad debts. Please make sure that you write it off and should not make any provision for bad debts becoz court may not agree for provision.
05 August 2011
Thanks Mr Mahendra for your opinion on the query , But i stll have a Doubt that before writing off do we require a permission from any Govt Body like Reserve Bank etc or we can straight away write off this amount .
I want to draw your attention on the Delhi high court Judgement where High Court decided:
All Grow Finance and Investment Pvt Ltd v CIT (Delhi HC): If the debt is not advanced in the ordinary course of business, it would not qualify for deduction as a bad debt. We are of the view that the only condition laid down in second part of sub-section (2) of Section 36 of the Act is that the amount should be advanced in the ordinary course of business which by itself proves its revenue nature and no further conditions are required to be satisfied which are only applicable with regard to debt qualifying as bad debt in the first part of sub-section (2).
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