Light!! Camera!! Action!! – Bad Debts Dichotomy

Light!! Camera!! Action!! – Bad Debts Dichotomy

In this article, I have invoked the concept of “Light!! Camera!! Action !!” which is the catchy “call-phrase” used in the Entertainment Industry to get everyone ready before an action takes place. Here, the call for action is to resolve and clear the dichotomous inequality in the treatment of Bad Debts under the provisions of Income Tax Law as compared to the GST Law – so that the principles of Equality of Law and Equal Protection to all within the territory as contemplated under Article 14 of the Constitution of India are upheld.

Contextual reference of Words Light!! Camera!! Action!!

Light !! means

something that makes vision possible or

to cause something to start burning or

the brightness that comes from the Sun every day on the surface of world canvas without default

“Light” here provides illuminating clarity on the provisions relating to the tax treatment of Bad Debts)

Camera !! means

a device that consists of a light-proof chamber with an aperture fitted with a lens and a shutter which the image of an object is projected onto a surface for recording (as on a photosensitive film or electronic sensor) or for translation into electrical impulses (as for television broadcast

(“Camera” here with its telescopic lens conveys that the stakeholders can see an image of what are the remedial measures required for the fair Tax Treatment of Bad Debts)

Action !! means

the fact or process of doing something to achieve an aim or the state or process of doing something or being active operation, something is done such as act or deed, movement or posture during some physical activity, force or energy man of action or the accomplishment of a thing usually over a period of time, in stages, or with the possibility of repetition.

(Action!! here conveys what a stakeholder anticipates in stages or in a swift manner to address and resolve the disparity in the tax treatment of Bad Debts considering generally accepted international law practices)

Article 14 of Constitution of India

It reads as under: “The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.

Meaning of Bad Debts

Bad Debts can be said to be uncollectible debt or uncollectible accounts receivables or uncollectible sundry debtors or any other nomenclature used in trade, business, or commerce by the organization. Such Debts often need to be written off in the books of account of seller or provider of services which hits detrimentally on the bottom line (Profits or Earnings or Surplus or Losses or Operating Margins or Deficits or Profitability Ratios) of such person. Such writing off also disrupts the working capital cycle of business enterprises, thus eroding the working capital ratios, dampening current and future prospects, sometimes resulting in winding up of the business enterprises due to bankruptcy or infeasibility or non-viability of business. In some cases, it tends to have a profound impact on the application of principles of conservatism, going concern, and prudence while drawing up financial statements of the business enterprise/s. Bad Debts may pertain to total dues or partial dues depending on the facts of the matter.

In the undergoing paras, I have tried to explain in a nutshell the legal provisions of Bad Debts write off for the normal businesses and Banking Sectors under Income Tax Act 1961 and Goods and Services Tax Act 2017.

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