Section 25 : Reverse of the amounts including bad debts

1) When maintaining accounts of the amounts received and expenses borne in the computation of the income earned by any person from any employment, business or investment, the person has to make proper adjustments at the time of reimbursement, recovery, relinquishment of claim, writing off, or remission in any of the following circumstances:-

a) Where the person pays back such amount or recovers the expense, as the case may be,

b) Where the accounts of the amount received have been maintained on the accrual basis, and the person subsequently relinquishes his right to receive that amount or where that amount is a debt claim of that person, and he writes off the debt as a bad debt, or

c) Where the accounts of the expense incurred have been maintained on the accrual basis, and the person subsequently relinquishes his liability to incur such expense or where that expense is a debt claim, the person for whom the debt is to be repaid remits the debt.

2) Any person may relinquish the right to receive any amount or to write off the debt liability of that person as a bad debt only in the following circumstances:-

a) In the case of a debt claim of any financial institution or bank, the debt claim is converted into a bad debt as per the specified criteria and

b) If, after having followed all proper measures to receive payment in circumstances other than those referred to in clause (a), that person is reasonably satisfied that the right or debt claim cannot be realised or recovered.