Ministry of Finance 

30.05.2016

Direct Taxation

CBDT endeavours to reduce litigation over bad debt

MANU/DTCR/0023/2016

The Central Board of Direct Taxes bolstered Departmental policies to reduce litigation arising from assessees writing off sums as ‘bad debt’.

The Board clarified that claim for debt in the previous year shall be admissible under under Section 36 of the Income Tax 1961, if it is written off or irrecoverable in the books of accounts for that previous and fulfils legislative stipulations.

Debt can be written off as ‘bad’, or irrecoverable’, permitting deduction by the assessee in its return on income. Income tax assessments often get bogged down in litigation over whether bad debt was actually irrecoverable.

Tags : income tax bad debt irrecoverable reducing litigation

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