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Bad debts under Section 36(1)(vii) require:
ACourt decree
BWrite-off in books of account
CProof of insolvency
DBoth write-off and decree
Answer & Solution
Correct answer: B. Write-off in books of account
1. Section 36(1)(vii) allows bad debts that are actually written off as irrecoverable in the assessee's accounts.
2. SC in TRF Ltd. v. CIT (2010): no proof beyond write-off needed.
3. Debt must be considered in computing income earlier OR represent money lent in money-lending/banking ordinary course.
_Source: ICAI BoS CA Final Paper 7, Ch 3 "Profits and Gains of Business or Profession"_
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