Section 41(4) — the law in short
What the courts have decided on section 41(4), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Vijaya Bank v CIT
Supreme CourtHelps taxpayerValidity unconfirmed
I debited the bad debt to the profit and loss account and reduced debtors in the balance sheet, but did not close each debtor's ledger account — is that an actual write-off under section 36(1)(vii)?
Yes. The Supreme Court held on 15 April 2010 that debiting the profit and loss account and simultaneously reducing loans and advances or debtors on the asset side, so that the year-end figure is shown net of the provision, is an actual write-off. What the Explanation inserted with effect from 1 April 1989 excludes is a debit to the profit and loss account matched by a credit to current liabilities and provisions — that is a provision, not a write-off. There is no further requirement to close the individual account of each debtor. The Assessing Officer can call for those accounts if he has reason to believe the deduction is being claimed twice.
Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.