In Brief
A company advanced ₹10 crores to a builder in 2007 for purchasing commercial property, which was never completed. The assessee sought to write off the amount as a bad debt deduction in 2009. The Revenue authority disallowed it, but the Income Tax Appellate Tribunal and High Court allowed the assessee's claim. On appeal, the Supreme Court held that a bad debt can be written off as a deduction only if: (1) it is actually written off in accounts; (2) the amount was taken into account in computing prior income or was lent in ordinary business; and (3) it is a genuine debt, not a mere advance. Here, the assessee failed to prove the advance was made in the ordinary course of business and the amount was for capital property acquisition, not revenue expenditure. The Court reversed the lower courts' decisions and dismissed the deduction claim.
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