Section 41(4) - Recovery of Bad debts - Income Tax - Ready Reckoner - Income Tax

Section 41(4) : Recovery of Bad Debts Where any bad debt has been allowed as deduction under section 36(1)(vii) and the amount subsequently recovered on such debt is greater than the difference between the debt and the deduction so allowed, the excess realization is chargeable to tax as business income of the year in which the debt is recovered. NOTE:- It is immaterial whether the business of the assessee is in existence or not during the previous year in which recovery is made. Under Section 41(4) , the relevant criterion is the identity of the assessee remaining the same and not the continued existence of the business. If there is a succession in business by way of amalgamation, demerger, or on death of a person, by his son, or where a firm is succeeded by another firm, then recovery of Bad debt is not taxable in hands of successor as business income, if the bad debt was earlier allowed as deduction to the predecessor.