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TMI Blog2015 (11) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... required to give advance to farmers. Therefore, the debts are connected with the business income earned by the assessee. The same is allowable under section 36(1)(vii). Alternately, it is allowable under section 37 also. In view thereof, allow the assessee's claim as the assessee is eligible to claim bad debt. - Decided in favour of assessee. - I. T. A. No. 345 /JP/ 2013 (assessment year 2007-08). - - - Dated:- 11-8-2015 - R. P. TOLANI (Judicial Member) B. L. Bhojwani for the appellant. Kailash Mangal for the respondent. ORDER 1. R. P. Tolani (Judicial Member).-The appeal is filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals), Kota dated January 21, 2013 for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by writing off them from the books of account and without proving that these have become bad debts. Writing off is only one of the conditions to claim deduction for bad debts. The other condition is that debt has become bad debt. 3. Aggrieved, the assessee preferred first appeal. However, the learned Commissioner of Income-tax (Appeals) held that the provisions of section 36(1)(vii) are subjected to provisions of section 36(2) and since the assessee is not in money lending business, the claim could not be allowed. Apropos the assessee's contention that it may be allowed under section 37, it was held that the assessee has failed to prove that debt had actually become bad. Therefore, the same are not allowable under section 37 also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have become bad in the previous year. This led to enormous litigation on the question of allowability of bad debt in a particular year, because the bad debt was not necessarily allowed by the Assessing Officer in the year in which the same had been written off on the ground that the debt was not established to have become bad in that year. In order to eliminate the disputes in the matter of determining the year in which a bad debt can be allowed and also to rationalise the provisions, the Amending Act, 1987, has amended clause (vii) of sub-section (1) and clause (i) of sub-section (2) of the section to provide that the claim for bad debt will be allowed in the year in which such a bad debt has been written off as irrecoverable in the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. As held by the hon'ble Supreme Court in the case of T. R. F. Ltd. v. CIT [2010] 323 ITR 397 (SC), if the assessee has written off bad debts as irrecoverable in the accounts of the assessee, the claim is to be allowed under section 36(1)(vii). The fact that the same were outstanding for last 3-6 years has not been disputed. It has not been disputed that the nature of business of the assessee is such that the assessee was required to give advance to farmers. Therefore, the debts are connected with the business income earned by the assessee. The same is allowable under section 36(1)(vii). Alternately, it is allowable under section 37 also. In view thereof, I allow the assessee's claim as the assessee is eligible to claim bad debt. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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