INCOME TAX ACT 1961

Business deduction under section 36(1)(vii) - Bad debts -Amount paid less as per agreement

Assessee entered into an agreement with D for development of land -In terms of said agreement assessee paid certain sum to D. Thereafter, earlier agreement was terminated and a fresh agreement was entered into under which D agreed to repay the aforesaid sum and an additional compensation but D paid lesser sum and balance amount was not paid. Assessee filed its return of income wherein unpaid amount was claimed as bad debt .A.O rejected assessees claim. Held : It was seen that assessee had shown in his returns in previous years certain amount along with additional compensation and interest as amount receivable under agreement and he had also paid tax on said amount and It was thereafter that in his accounts he had written off amount in question as bad debt as it was irrecoverable, Therefore on facts, both conditions contemplated under section 36(1)(vii) and sub-section (2)(i) were complied with and, therefore, assessees claim was rightly allowed.

Income tax act 1961 section 36(1)(vii)

Decision :In favour of assessee.
A.Y : 2001-02

Commissioner of Income Tax v. K. Raheja Development Corpn.