The Tax Publishers2021 TaxPub(DT) 0153 (Mum-Trib)

INCOME TAX ACT, 1961

Section 36(1)(vii) read with Section 36(2)

Where in respect of deduction claimed under section 36(1)(vii) read with section 36(2), assessee could not establish the efforts undertaken for the recovery and AO had also not established that the verification and enquiry had been properly conducted, matter was remanded to the file of AO to verify the claim.

Business deduction under section 36(1)(vii) - Bad debts - Allowability of -

Assessee provided loan to its sister concern. It treated loan provided as bad and not recoverable and hence, deduction under section 36(1)(vii) read with section 36(2) was claimed. AO held that assessee could not substantiate with any information on recovery of loan. Thus, AO made disallowance of claim of bad debts. Held: Assessee could not substantiate the efforts made in respect of recovery of loan and further more in the case of sister concern, it will be easy for the assessee considering the advance given in the normal course of trade and place of business is the same. Even in the assessment order, AO had only referred to the fact that it is a related concern but could not establish that the verification and enquiry had been conducted. Thus, considering the nature of transactions with the related concern and as assessee could not establish the efforts undertaken for the recovery, matter was remanded to the file of AO to verify the claim made by the assessee and the efforts made by the assessee in recovery of the loan.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2004-05



IN THE ITAT, MUMBAI BENCH

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT