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  

Year 1990-1991 and Assessment Year 1993-1994.  Prior to 1st  

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  

1st April, 1989 and post-1st April, 1989:

...2/-

- 2 -  

“Pre-1  st   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.

Post-1  st   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.”

This position in law is well-settled.  After 1st  

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.