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Issues Involved:
The issue involves the interpretation of section 36(1)(vii) of the Income-tax Act, 1961 regarding the treatment of bad debts and the requirement to establish their irrecoverability. Summary: The High Court of Gujarat considered a case where the Revenue sought a direction for the Income-tax Appellate Tribunal to forward a statement of case regarding the deletion of an addition of Rs. 4,36,307 on account of bad debt. The Tribunal had confirmed the order passed by the Commissioner of Income-tax (Appeals) based on the amended provisions of section 36(1)(vii) of the Act, stating that the assessee was not required to establish that the debt had become bad during the previous year. The assessee had written off the amount as bad debt due to the insolvency of a firm to which it had advanced money. The Assessing Officer contended that the debt had not been proven as bad and that mere delay in recovery did not qualify it as a bad debt. However, the Commissioner of Income-tax (Appeals) and the Tribunal found that under the amended provisions of section 36(1)(vii), the assessee was not required to establish the debt as bad in the previous year, and writing off the amount sufficed. The Court noted that u/s 36(1)(vii) of the Act, deduction for bad debts was allowed if written off as irrecoverable in the accounts for the previous year. The Tribunal upheld the decision based on the amended provision, emphasizing that the genuineness of the claim was not in doubt. Consequently, the application was rejected, and the rule was discharged with no costs awarded.
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