Full Judgment Text
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5293 OF 2003
T.R.F. Limited ...Appellant(s)
Versus
Commissioner of Income Tax, Ranchi ...Respondent(s)
With Civil Appeal No.5294 of 2003
O R D E R
Heard learned counsel on both sides.
In these appeals, we are concerned with Assessment
st
Year 1990-1991 and Assessment Year 1993-1994. Prior to 1
April, 1989, every assessee had to establish, as a matter
of fact, that the debt advanced by the assessee had, in
fact, become irrecoverable. That position got altered by
deletion of the word “established”, which earlier existed
in Section 36(1)(vii) of the Income Tax Act, 1961 [`Act',
for short].
For the sake of clarity, we re-produce hereinbelow
provisions of Section 36(1)(vii) of the Act, both prior to
st st
1 April, 1989 and post-1 April, 1989:
...2/-
- 2 -
st
“Pre-1 April, 1989:
Other deductions.
36.(1) The deductions provided for in the
following clauses shall be allowed in respect
of the matters dealt with therein, in
computing the income referred to in section
28--
(i) to (vi) xxxx xxxx xxxx
(vii) subject to the provisions of sub-section
(2), the amount of any debt, or part thereof,
which is established to have become a bad debt
in the previous year.
st
Post-1 April, 1989 :
Other deductions.
36.(1) The deductions provided for in the
following clauses shall be allowed in respect
of the matters dealt with therein, in
computing the income referred to in section
28--
(i) to (vi) xxxx xxxx xxxx
(vii) subject to the provisions of sub-section
(2), the amount of any bad debt or part
thereof which is written off as irrecoverable
in the accounts of the assessee for the
previous year.”
st
This position in law is well-settled. After 1
April, 1989, it is not necessary for the assessee to
establish that the debt, in fact, has become
irrecoverable. It is enough if the bad debt is written
off as irrecoverable in the accounts of the assessee.
...3/-
- 3 -
However, in the present case, the Assessing Officer has
not examined whether the debt has, in fact, been written
off in accounts of the assessee. When bad debt occurs,
the bad debt account is debited and the customer's account
is credited, thus, closing the account of the customer.
In the case of Companies, the provision is deducted from
Sundry Debtors. As stated above, the Assessing Officer
has not examined whether, in fact, the bad debt or part
thereof is written off in the accounts of the assessee.
This exercise has not been undertaken by the Assessing
Officer. Hence, the matter is remitted to the Assessing
Officer for de novo consideration of the above-mentioned
aspect only and that too only to the extent of the write
off.
Subject to above, the civil appeals filed by the
assessee are disposed of with no order as to costs.
......................J.
[S.H. KAPADIA]
......................J.
[AFTAB ALAM]
New Delhi,
February 09, 2010.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5292 OF 2003
T.R.F. Limited ...Appellant(s)
Versus
Commissioner of Income Tax, Ranchi ...Respondent(s)
O R D E R
In view of our Order passed today in Civil Appeal
No.5293 of 2003 and Civil Appeal No.5294 of 2003, we remit
this case concerning Assessment Year 1994-1995 also to the
Assessing Officer, who is directed to consider the
question as to whether the write off is done by the
assessee in its accounts in accordance with the law
declared by us in the above order.
The civil appeal filed by the assessee,
accordingly, stands disposed of with no order as to costs.
......................J.
[S.H. KAPADIA]
......................J.
[AFTAB ALAM]
New Delhi,
February 09, 2010.