The Tax Publishers2021 TaxPub(DT) 0204 (Karn-HC)

INCOME TAX ACT, 1961

Section 36(1)(viia)

Where provision for bad and doubtful debts should be made in accounts of the assessee and once a provision is made and the amount of deduction is within the limit prescribed under the Act, assessee would be entitled to deduction of the amount for which provision is made in the books of account, therefore, Tribunal was not justified in allowing appeal of the assessee claiming deduction towards bad and doubtful debts.

Business deduction under section 36(1)(viia) - Provision for bad and doubtful debts - Condition precedent for allowance of claim under section 36(1)(viia) - Allowability

Issue arose for consideration as to whether Tribunal was right in holding that creation of a requisite reserve in the books of account was a condition precedent for allowance of the claim under section 36(1)(viia). Held: The condition precedent for claiming deduction under section 36(1)(viia) is that a provision for bad and doubtful debts should be made in accounts of assessee. If a provision is made in excess of the limits prescribed under the section, assessee would not be entitled to deduction of the excess amount. Once a provision is made and the amount of deduction is within the limit prescribed under the Act, assessee would be entitled to deduction of the amount for which provision is made in books of account. Therefore, Tribunal was not justified in allowing appeal of assessee claiming deduction towards bad and doubtful debts without making provision for the same.

Followed:CIT v. Syndicate Bank 2020 TaxPub(DT) 1313 (Karn-HC) and CIT v. Vijaya Bank [ITA NO.1066 of 2008, dt. 21-10-2014].

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2009-10



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