| Case ID |
0fce796d-a5c1-4c1b-bf1f-50994351ff26 |
| Body |
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| Case Number |
IT APPEAL NO. 1442 OF 2006 |
| Decision Date |
Dec 07, 2006 |
| Hearing Date |
|
| Decision |
The court held that the assessee is entitled to a deduction for the bad debts written off as irrecoverable in its accounts for the previous year as per the provisions of the Income-tax Act. The decision emphasized that the process of writing off debts should be based on an honest assessment of recoverability, and the circular issued clarifies that litigation regarding the timing of such write-offs should be eliminated. The case concluded that there was no substantial question of law arising from the decision, and thus the appeal was dismissed. |
| Summary |
In the case of Commissioner of Income-tax v. Morgan Securities & Credits (P.) Ltd., the Delhi High Court addressed the issue of bad debts under the Income-tax Act, 1961. The assessee, engaged in money lending, wrote off substantial amounts as bad debts after initiating legal actions against the debtors. The Assessing Officer initially disallowed these write-offs, leading to an appeal. The court ruled in favor of the assessee, stating that a debt becoming bad or irrecoverable is a natural conclusion of the circumstances surrounding the transaction. The judgment underscored the importance of an honest opinion in assessing the recoverability of debts. The ruling is significant for tax practitioners and businesses engaged in credit, clarifying the conditions under which bad debts can be deducted. |
| Court |
Delhi High Court
|
| Entities Involved |
Morgan Securities & Credits (P.) Ltd.
|
| Judges |
VIKRAMAJIT SEN,
S. MURALIDHAR
|
| Lawyers |
R.D. Jolly,
Vishnu Sharma,
C.S. Aggarwal,
Prakash Kumar
|
| Petitioners |
Commissioner of Income-tax
|
| Respondents |
Morgan Securities & Credits (P.) Ltd.
|
| Citations |
2007 SLD 3780,
(2007) 292 ITR 339,
[2007] 162 TAXMAN 124 (DELHI)
|
| Other Citations |
Jethabhai Hirji and Jethabhai Ramdas v. CIT [1979] 120 ITR 792 (Bom.),
Nandlal Vithaldas v. CIT [1989] 180 ITR 609/[1990]49 Taxman 198 (Bom.),
CIT v. Dunlop India Ltd. [1994] 209 ITR 987/ 74 Taxman 162 (Cal.),
CIT v. Coates of India Ltd. [1998] 232 ITR 324/ 99 Taxman 174 (Cal.),
CIT v. Alegemene Bank Netherland [1994] 73 Taxman 307 (Cal.),
Sarangpur Cotton Mfg. Co. Ltd. v. CIT [1983] 143 ITR 166/ 12 Taxman 259 (Guj.),
Hindustan Commercial Bank Ltd. v. ITO[1983] 16 TTJ (All.) 65,
ITO v. Janki Das Laxmi Narain [1985] 21 TTJ (All.) 233,
V.D. Swami & Co. Ltd. v. Dy. CIT[1993] 44 ITD 91 (Mad.),
CIT v. Girish Bhagwat Prasad [2002] 256 ITR 772 (Guj.),
Dy. CIT v. Patidar Ginning & Pressing Co. [1999] 157 CTR (Guj.) 177
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
36(1)(vii),
36(2)
|