Sec. 36(1)(vii) of Income Tax Act, 1961— Business Disallowance —After 01.04.1989, a mere provision for bad debt would not be entitled to deduction under Section 36(1)(vii).

Facts: Issue which arises for consideration in this appeal is whether the assessee has written off the debt as bad debt as required under Section 36(1)(vii) read with Section 36(2).

Held, that in the facts of the case, twin issues viz., (i) whether debt which was written off during the relevant year was offered to income in Previous year or earlier years, (ii) whether the assessee has debited the amount of doubtful debt to profit and loss account and has reduced the same from the asset side of the balance sheet require determination to decide the claim of the assessee with regard to writing off the bad debt. It was inter alia held that after 01.04.1989, a mere provision for bad debt would not be entitled to deduction under Section 36(1)(vii). Therefore, the impugned orders are quashed and the matter is remitted to the assessing officer to ascertain twin questions viz.,(i) whether debt which was written off during the relevant year was offered to income in Previous year or earlier years, (ii) whether the assessee has debited the amount of doubtful debt to profit and loss account and has reduced the same from the asset side of the balance sheet. - HAJEE A.P. BAVA AND COMPANY CONSTRUCTIONS PVT. LTD. V/s ASSTT. CIT - [2020] 26 ITCD Online 079 (KARN)