Section 36(2) of the Income Tax Act

Income-tax Act, 2025: ss.29, 30, 31, 32

Section 36(2) falls under section 36 of the Income-tax Act, 1961, which corresponds to section 29 (Deductions related to employee welfare), section 30 (Deduction on certain premium), section 31 (Deduction for bad debt and provision for bad and doubtful debt) and section 32 (Other deductions) of the Income-tax Act, 2025.

Read section 29 of the 2025 ActRead section 30 of the 2025 ActRead section 31 of the 2025 ActRead section 32 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 36(2) is TRF Ltd. v. CIT (323 ITR 397), cited in 714 of the 618 judgments on BharatTax that turn on this section.

Leading authorities on Section 36(2)

TRF Ltd. v. CIT
323 ITR 397 · 2010 · Supreme Court
714
citing judgments

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.

CIT v. Asahi India Safety Glass Ltd.
346 ITR 329 · 2012 · High Court
129
citing judgments

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.

CIT v. Mysore Sugar Co. Ltd.
46 ITR 649 · 1962 · Supreme Court
120
citing judgments

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.

CIT v. Pfizer Ltd.
330 ITR 62 · 2011 · High Court
78
citing judgments

An insurance claim received on stock in trade constitutes business income and is not an independent source of income.

Lord Radcliffe in Commissioner of Taxes v. Nchanga Consolidated Copper Mines Ltd.
58 ITR 241 · 1965 · Reported
69
citing judgments

The test of enduring benefit for classifying expenditure as capital or revenue is not absolute; expenditure incurred for an enduring advantage may nonetheless be on revenue account, as the test can break down depending on the facts.

Mohan Meakin Ltd. v. CIT
348 ITR 109 · 2012 · High Court
58
citing judgments

Unrecoverable trade advances, including loans to joint venture partners or advances against land, are allowable as a business loss incidental to trade under Section 37(1) of the Income Tax Act when written off in the books of accounts. Such losses are treated akin to bad debts eligible for deduction.

Ramchandar Shivnarayan v. CIT
111 ITR 263 · 1978 · Supreme Court
48
citing judgments

A business loss is deductible if it has a direct and proximate nexus with business operations or is incidental to them, applying a commercial standard, even without an explicit statutory provision for its deduction.

CIT v. Shreyas S. Morakhia
342 ITR 285 · 2012 · High Court
48
citing judgments

For a share broker, the unrealised value of shares from clients or other trade balances written off is deductible as a bad debt under section 36(1)(vii) if the corresponding income was previously recognized. This principle applies to bad debts arising from revenue transactions, not capital loans.

CIT v. Anil Kumar
392 ITR 552 · 2017 · High Court
40
citing judgments

When there is nothing on record to establish the financial capacity, creditworthiness, or relationship of a donor with the assessee, an addition to income can be justified.

Smt. Neena Syal v. ACIT
70 ITD 62 · 1999 · ITAT
39
citing judgments

Disallowance of expenses cannot be made if their genuineness is not challenged. For unexplained money, possession of gold jewellery by married ladies up to 500 grams is considered explained.

Judgments on Section 36(2)

Kamlesh S. Patil, Mumbai vs. ITO 24(2)(3), Mumbai

In the result, appeal of the assessee is allowed for statistical purposes as indicated above

ITA 1121/MUM/2017[2012-13]Status: DisposedITAT Mumbai15 Mar 2019AY 2012-13

Bench: Shri Ramit Kochar & Shri Ravish Soodआयकर अपीऱ सं./I.T.A. No.1121/Mum/2017 (नििाारण वर्ा / Assessment Year : 2012-13) बिाम/ Kamlesh S. Patil Ito 24(2)(3) Ockam Systems Room No. 609,6Th Floor, 1001, 10Th Floor, Piramal Chambers, V. Quantum Tower, Lalbaug, Mumbai Rambaug Lane 400012 Nadiyadwada Colony 2 Malad(West) Mumbai-400064 स्थायी ऱेखा सं./ Pan: Aadpp9859R (अपीऱाथी /Appellant) (प्रत्यथी / Respondent) .. Assessee By: Shri. Ajay R. Singh (Ar) Revenue By: Shri Manoj Kumar Singh, (Dr) सुनवाई की तारीख /Date Of Hearing : 22.01.2019 घोषणा की तारीख /Date Of Pronouncement : 15.03.2019 आदेश / O R D E R Per Ramit Kochar: This Appeal, Filed By Assessee, Being Ita No. 1121/Mum/2017, Is Directed Against Appellate Order Dated 29.12.2016 In Appeal No. Cit(A)-36/It-117/Ito-24(2)(3)/2015-16, Passed By Learned Commissioner Of Income Tax (Appeals)-36, Mumbai (Hereinafter Called “The Cit(A)”), For Assessment Year(Ay) 2012-13, The Appellate Proceedings Had Arisen Before Learned Cit(A) From The Assessment Order Dated 28.03.2015 Passed By Learned Assessing Officer

For Appellant: Shri. Ajay R. Singh (AR)For Respondent: Shri Manoj Kumar Singh, (DR)
Section 133(6)Section 143(2)Section 143(3)Section 36Section 36(1)(vii)

DCIT, Circle - 6(1), Kolkata vs. M/S. Dewars Garage Limited, Kolkata

In the result, the appeal of the revenue is treated as partly allowed for statistical purpose

ITA 528/KOL/2018[2011-12]Status: DisposedITAT Kolkata07 Mar 2019AY 2011-12

Bench: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi, Jm] I.T.A. No. 528/Kol/2018 Assessment Year: 2011-12 Dcit, Circle - 6(1) Kolkata...................................…………………………..........................Appellant P-7, Chowringhee Square, Kolkata – 700 069. M/S. Dewars Garage Limited....................………………………………........................Respondent 4, Council House Street, Kolkata – 700 001. [Pan: Aabcd 7605 C] Appearances By: Shri Radhey Shyam, Cit, Dr & Shri Shankar Halder, Jcit Appearing On Behalf Of The Revenue. Smt. Nilima Joshi, Fca Appearing On Behalf Of The Assessee. Date Of Concluding The Hearing : March 07, 2019 Date Of Pronouncing The Order : March 07, 2019 Order Per P.M. Jagtapthis Appeal Is Preferred By The Revenue Against The Order Of Ld. Cit(A) – 17, Kolkata Dated 27.10.2017. Ground No. 1 Raised By The Revenue In This Appeal Reads As Under: “That On The Facts & Circumstances Of The Case, The Ld. Cit(A) Has Erred In Deleting The Disallowance Of Rs. 45,07,049/- & Rs. 22,61,227/- Claimed By The Assessee In Respect Of Bad Debt Written Off As Suppliers Respectively Without Considering The Fact That The Assessee Failed To Furnish Documentary Evidences In Support Of Its Claim At The Time Of Assessment Proceedings As Well As Remand Proceedings & Also Ignoring Proviso To Section 36(Ii) Of The I.T. Act, 1961.” 2. The Assessee In The Present Case Is A Company Which Is Carrying On The Business As A Authorised Dealer Of Maruti Cars. The Return Of Income For The Year Under Consideration Was Filed By It On 31.03.2012 Declaring A Total Income Of Rs. 27,11,195/-. In The Profit & Loss Account Filed Along With The Said Return, A Sum Of Rs. 1,68,26,623/-

Section 143(3)Section 36Section 36(1)(vi)Section 36(2)