25 April 2009
So far income tax is concerned, provision for bad debt is of no consequence. Income tax is concerned with actual writting off of the debt.
Similarly, amount of bad debt is also of no relevance. Whether the amount is big or small is a relative term.
If the amount was treated as income in earlier years and was actually written off in the books of accounts, is an allowable expenditure.
01 May 2009
The income tax recognises the actual write off and not the provisions irresprctive of the amount. There are enough case laws to support the contention of the assessee that once the assessee has actully written of the debts, it is allowable in the year of write off.
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