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Is bad debts allowable in income tax

Nisha Yadav (Accounts exe) (455 Points)

05 August 2014

Dear All,

Pleae let me know is bad debts allowable expenses as per income tax.

We have raised a invoice in year 2011-12 for the amount 5 lac towards event managemnet service & till now we did not recived amount now we want to write off that amount .

Please help me

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17 Replies

Neeraj (student) (27 Points)
Replied 05 August 2014

Yes, it is an allowable expense u/s 36(1)(vii)..

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Kishor Bhat (CA final CS executive (from Bangalore)) (1881 Points)
Replied 05 August 2014

Yes. . . . . . . . . . . . . .

Nisha Yadav (Accounts exe) (455 Points)
Replied 05 August 2014

Thanks but my ca is saying that it will not be allowed ... there is any cas law so that i can show him

CA Mukesh Choudhari (xyz) (153 Points)
Replied 05 August 2014

it can be allowed provided in any previous year it is recorded in income i.e sales have been recognised. and it should be written of as irrecoverable in the books. bab debts can be claim in year of write off. it should not be a provision ..only actual bad debt....assesse need not have to prove the irrecoverablity the fact that it have been wriiten off in books ..make eligiblity for bad debts deduction...so no case law available...case laws are availavle for revovery of babd debts...for its taxablity

Kishor Bhat (CA final CS executive (from Bangalore)) (1881 Points)
Replied 05 August 2014

Type that section in google. U get many cases. Its allowable.

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Nisha Yadav (Accounts exe) (455 Points)
Replied 05 August 2014

Thanks to all ... but please let me knot how to convience my ca

Kishor Bhat (CA final CS executive (from Bangalore)) (1881 Points)
Replied 05 August 2014

Show some recent case law. Or if u have any tax book u only show dis section. .

Kishor Bhat (CA final CS executive (from Bangalore)) (1881 Points)
Replied 05 August 2014

When provisions itself and also many court cases saying its allowable then question him on what basis u r saying its nt allowable..etc.

Kishor Bhat (CA final CS executive (from Bangalore)) (1881 Points)
Replied 05 August 2014

cases : TRF ltd vs CIT, General insurance corp of India. And to claim it as allowable, certain conditions shud satisfy. Viz., debt must be incidental to the business, it shud be revenue in nature, it must have been taken into a/c in computing income in the year 2011-12, must have been written off in the buks of a/c in current year. In ur case, all r satisfied so no doubt its allowable.

CA. sanjeet Kumar Ojha (Chartered Accountant) (272 Points)
Replied 05 August 2014

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Nisha Yadav (Accounts exe) (455 Points)
Replied 05 August 2014

Thanku very much all of you :)

prashant (tax officer) (24 Points)
Replied 05 August 2014

there is no need to follow any case law...sec 36(1)(via) is sufficient to deal with the present situation...if u fulfill 2 conditions of sec36(1)(vii) then u can deduction In respect of bad debt...