“Section 36(2)(vii)”
The decision most relied on for Section 36(2)(vii) is TRF Ltd. v. CIT (323 ITR 397), cited in 714 judgments on BharatTax.
Leading authorities on Section 36(2)(vii)
For claiming deduction for bad debts under section 36(1)(vii) of the Income Tax Act, it is sufficient for the assessee to write off the debt as irrecoverable in its accounts, and it is not necessary to prove that the debt has actually become irrecoverable.
For a bad debt deduction under Section 36(1)(vii), the debt must be actually written off as irrecoverable in the assessee's accounts, distinct from merely making a provision for bad and doubtful debts. The assessee bears the onus to satisfy the conditions under both Section 36(1)(vii) and Section 36(2) of the Income-tax Act.
A provision for doubtful debts cannot be added back while computing book profits under Section 115JB of the Income-tax Act for Minimum Alternate Tax (MAT) purposes.
Expenses incurred for software license purchase, development of miscellaneous software, and maintenance of websites are considered revenue in nature. Such expenses are deductible in the year they are incurred.
When advances extended in the normal course of business operations become irrecoverable and are written off, these amounts are allowable as a business loss or revenue expenditure.
For computing book profits under Section 115JB, an Assessing Officer's power is limited to examining duly certified books and making adjustments only as per the Explanation. A provision for bad and doubtful debts, being a diminution in the value of an asset (receivable), does not constitute a 'provision for liability' under Clause (c) of the Explanation and therefore cannot be added back.
Allotment of shares to employees under an Employee Stock Option Plan (ESOP) before April 1, 2000, is not a taxable perquisite if the benefit's value is unascertainable at the time of option exercise due to conditions like a lock-in period.
Expenditure incurred by an assessee in relation to income not forming part of the total income is not deductible under Section 14A(1). The disallowance must be restricted to direct and indirect expenses having an approximate connection with the earning of such exempt income, and Rule 8D applies from Assessment Year 2008-09.
