R.K Abichandani, J.:— The Revenue has suggested the following question in para. 4 of its application seeking a direction on the Income-tax Appellate Tribunal to forward the statement of case in respect thereof under section 256(2) of the Income-tax Act, 1961:
“Whether, the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income-tax (Appeals) deleting the addition of Rs. 4,36,307 on account of bad debt observing that in view of the amended provisions of section 36(1)(vii) the assessee is not required to establish that the debt had become bad?”
2. The Tribunal rejected the application made under section 256(1) of the Act for forwarding these questions to the High Court on January 5, 1998, holding that, in view of the amended provision of section 36(1)(vii) of the Act which came into force from April 1, 1989, the assessee was not required to establish that the debt had really become bad during the previous year.
3. The assessee had written off an amount of Rs. 4,36,307 on account of its having become bad debt. That amount stood in the name of Abhay Textiles as bad debt. The assessee had, in the course of business, advanced some money to that firm which was a sole selling agent of Prasad Mills Ltd., in which it had deposited the loan amount as security.
4. Prasad Mills Ltd. incurred losses and ultimately closed down its business on January 24, 1984, and therefore Abhay Textiles could not realise its money from that company and the assessee, in turn, could not realise its dues from Abhay Textiles. According to the Assessing Officer, the assessee could not prove that the debt had become bad and that the assessee did not try to recover the amount and further that mere delay in recovery did not convert the debt into a bad debt.
5. The Commissioner of Income-tax (Appeals) found that the amended provisions of section 36(1)(vii) of the Act were applicable under which the assessee was not required to establish that the debt had become bad in the previous year and mere writing off of the amount as bad debt was sufficient. Even on the merits, the first appellate authority found that there was no chance for the assessee to recover the amount. Hence, the debt really became bad. The Tribunal also upheld the contention of the assessee on the basis of the provisions of section 36(1)(vii) of the Act which came into force from April 1, 1989, and upheld the findings of the first appellate authority.
6. Under the provisions of section 36(1)(vii) of the Act, deduction was to be allowed in computing the income referred to in section 28 of the Act of the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year subject to the provisions of sub-section (2). Prior to the amendment from April 1, 1989, the allowance under this clause was confined to the debts and loans which had become irrecoverable in the accounting year. Thus, under the provisions of section 36(1)(vii) as in force from April 1, 1989, all that the assessee had to show was that the bad debt was written off as irrecoverable. The genuineness of such a claim made by the assessee was not in doubt. Therefore, all that the Tribunal has done is to uphold the first appellate authority's decision, applying the provisions of the amended section 36(1)(vii) of the Act, and no question of law arises in the matter from such application of the provision to the facts of the case.
7. The present application is, therefore, rejected. Rule is discharged with no order as to costs.