Topic
Bombay High Court clarifies that taxpayers can claim bad debt deduction under Section 36(1)(vii) of the Income Tax Act by merely making a provision in the P&L account if litigation is pending, without requiring an express write-off. This ruling reconciles conflicting precedents and eases compliance for businesses awaiting dispute resolution.
The ITAT Bangalore has ruled that for bad debt deduction under Section 36(1)(vii), a mere book write-off by the assessee is sufficient - no proof of borrower default, recovery attempts, or debtor identification is mandatory. This clarifies a critical compliance standard for businesses and lenders, shielding them from arbitrary disallowances based on procedural overreach by tax authorities.
ITAT Mumbai rules that banks can claim bad debt deductions under Section 36(1)(vii) of the Income Tax Act without requiring a credit balance in the provision account under Section 36(1)(viia). The decision clarifies that double deduction is impermissible only if a provision credit balance exists, offering relief to financial institutions on tax treatment of written-off debts.