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| The Tax Publishers2020 TaxPub(DT) 4434 (Mum-Trib) INCOME TAX ACT, 1961
Section 41(4)
Taxing the recovery on account of deduction being allowed under section 36(1)(viia) , the question of invoking section 41(4) would not arise, if the bad debts written off is adjusted against the provision allowed under section 36(1)(viia) and no deduction of bad debts written off is claimed.
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Business income - Profit chargeable to tax under section 41(4) - Recovery in respect of bad debts written off -
Assessee bank recovered bad debt in respect of which, no claim of deduction was made under section 36(1)(vii) in the past. AO held that assessee claimed deduction of provision for bad and doubtful debts under section 36(1)(viia) out of which bad debts written off is set off. Accordingly, he held that when bad debts written off is recovered subsequently, the same partakes the character of deemed income in the year of receipt in terms of Section 41(4) and therefore, brought to tax the same.Held: The assessee pleaded that the provisions of section 41(4) are applicable only when the recovery of bad debts are in relation to a debt for which a deduction under section 36(1)(vii) is allowed. As the assessee bank in the instant case had not claimed any deduction under section 36(1)(vii) in earlier years, the recovery of bad debts could be taxed under section 41(4).
REFERRED :
FAVOUR : In favour of assessee.
A.Y. : 1996-97
INCOME TAX ACT, 1961
Section 92C
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