Published on: December 10, 2023 at 15:42 IST
Court: Supreme Court of India
Citation: CIT v. Khyati Realtors (P) Ltd. (2022)
Honourable Supreme Court of India has held that Section 36 of the Income Tax Act, 1961 provides for the deductions that can be claimed in order to calculate taxation. It is held that writing off the debt of the business is allowed as a deduction under Clause (vii) of sub-section (1) of Section 36 subject to the fulfilment of the conditions set forth in sub-section (2) of Section 36 of the IT Act.
13. The income of every assessee has to be assessed according to the statutory framework laid out Chapter IV, Part D of the Act. That chapter deals with heads of income. Section 28 of the Act deals with the chargeability of income to tax under the head ‘Profits and Gains of Business or Profession’. The other deductions that an assessee can claim are elaborated under Section 36 of the Act, which opens with the phrase “the deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in Section 28”.
For the purposes of computing income chargeable to tax, therefore, besides specific deductions, ‘other deductions’ enumerated in different clauses of Section 36 can be allowed by the AO. Each of the deductions must relate to the business carried out by the assessee. If the assessee carries on a business and writes off a debt relating to the business as irrecoverable, it would without doubt be entitled to a corresponding deduction under clause (vii) of sub-section (1) of Section 36 subject to the fulfilment of the conditions set forth in sub-section (2) of Section 36 of the IT Act.
Drafted By Abhijit Mishra