Section 59 — the law in short
What the courts have decided on section 59, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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Bharti Bhushan Jindal v ACIT
ITATHelps departmentValidity unconfirmed
I lend money on the side and offer the interest as income from other sources. Four borrowers have not repaid and I have written the principal off. Can I deduct it under s.57(iii), or as a bad debt?
Neither. The Chandigarh Bench held that the principal advanced is a capital outflow, and s.57(iii) expressly excludes expenditure in the nature of capital expenditure, so a write-off of the principal cannot be deducted from interest assessed under s.56. The bad-debt route under s.36 also failed, because the amount written off had never been taken into account in computing income in any earlier year — only the interest had been offered.
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Statutory position — s.59: the s.41(1) deemed-income rule applied to income from other sources
CBDT Circulars & InstructionsCuts both ways
I was allowed a deduction under s.57 in an earlier year for a liability that has now been written back. Is the write-back taxable, and under which head?
Yes, and under the head income from other sources. Section 59(1) provides that s.41(1) applies, so far as may be, in computing the income of an assessee under s.56 as it applies in computing income under the head profits and gains of business or profession. Sub-sections (2) and (3) of s.59 stand omitted.
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.