Prior to April 01, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable.
However, amendment to Section 36(1)(vii) of the Income Tax Act, 1961, changed this position. The Supreme Court has very clearly stated in a recent case, that after April 01, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee.
The logic is clear-if you can’t help them; at least don’t harass them!
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