Validity of write off of debt in one year and claim in next year

In Dy. CIT v. EDS Electronic Data Systems (India) (P) Ltd (2009) 23 DTR (Del) (Trib) 10 the assessee wrote off Rs.314.90 lakh as bad debt by making provision in the profit and loss account in the account year relevant to the assessment year 2000-2001. However, the claim of deduction was made in the assessment year 2001-02. The AO disallowed the claim for the reason that the provision was made in the previous year and the claim was made in the subsequent year. The Commissioner (Appeals) allowed the deduction.

The Revenue placed reliance on the decision in the case of South India Surgical Co Ltd v. Asstt. CIT (2006) 287 ITR 62 (Mad) and contended before the tribunal that the claim of deduction is not allowable. The tribunal held that the assessee had written off the amount in the assessment year 2000-2001 and it was not the case of the revenue to claim the write off as not being bonafide. Apart from the plea of non-debit to profit and loss account in the year of claim of deduction there was no other argument placed by the AO or by the Departmental Representative. Factually the amount was written off in the immediate preceding year and it does not exist in the books of the assessee in the year of claim of deduction. It is a case of postponement of claim by one year to which there could possibly be no objection by the Revenue. Accordingly, the claim was allowed by the tribunal. Thus the decision was in favour of the assessee.