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TMI Blog1995 (1) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... Hyderabad against the debtors and the suits were pending. He was, therefore, of the view that the debts in question were not bad and disallowed the claim. 3. On appeal, the CIT(A) referred to the amendment made to section 36(1)(vii) of the Act by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989 and held that from the assessment year 1989-90 the claim for bad debts has to be allowed if the assessee writes them off in the books of account and there was no option available to the department to go into the question whether the debts were really bad or not. In this view he directed the Assessing Officer to allow the claim. 4. In the appeal it is contended on behalf of the revenue that even after the amendment it is open to the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 1989-90 the debt has to be allowed as deduction in the year in which it is written off by the assessee and there is no other option available to the Assessing Officer. That this is so, would be clear from the object and ambit of the amendment made in 1987 as explained by the CBDT in Circular No. 551 dated 23-1-1990 [183 ITR (Statutes) Page 37]. The Circular may be extracted for ready reference as follows : " 6.6. Amendments to sections 36(1)(vii) and 36(2) to rationalise provisions regarding allowability of bad debts.--- The old provisions of clause (vii) of sub-section (1) read with sub-section (2) of the section laid down conditions necessary for allowability of bad debt. It was provided that the debt must be established to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board by certain Chambers of Commerce to the effect that, in the case of banks, the Assessing Officer should give full deduction for all bad and doubtful debts actually written off in the books of the banks without any questioning, since the banks are in a better position to decide whether any of their debts are realisable or not. The Board explained the legal position thus : ". . . . the question whether a debt is a bad debt and when it became bad, are mainly question of fact to be determined in case of dispute not by the assessee or by the exercise of any option on his part of declaring it bad but by the Income-tax Officer (now Assessing Officer) (subject to appeal) upon a consideration of all relevant circumstances. When all the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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