It is not permissible to waive a debt and count that as zakah
Question

About three years ago one of my friends came to Dubai in search of job. He requested me to pay for his visa, medical and other expenses which amounted nearly Dhs. 4500/= (four thousand five hundred Dirhams) i.e. about 1200/= u.s.dollars. Due to some reasons he could adjust himself to the new country and returned back to India promising me to return to me the amount Dhs. 4500/= which I had spent for him. After one year he could only return Dhs. 1000/= (one thousand Dirhams only). Thereafter, I persistently demanded to return to me the balance amount Dhs. 3500/= (about USD 900) which he never returned. During my last visit to my hometown two months back, he sent message to me that his financial condition was not good and he was not in a position to return the balance amount under any circumstances. He also requested me to waive the due amount Dhs. 3500/= as ZAKAAT.
My question is ; CAN I WAIVE THE AMOUNT DHS. 3500/= AS ZAKAAT ( CONSIDERING AS ZAKAAT GIVEN TO THIS MY FRIEND )FROM THE ZAKAAT AMOUNT WHICH I HAVE TO TAKE OUT DURING THIS HOLY MONTH OF RAMADAN ? CAN I DEDUCT THIS AMOUNT FROM THE TOTAL ZAKAAT AMOUNT WHICH I HAVE TO GIVE TO THE POORS THIS RAMADAN ?
Praise be to Allah.It was narrated in al-Saheehayn from ‘Abd-Allah ibn ‘Abbas (may Allah be pleased with them both) that the Messenger of Allah (peace and blessings of Allah be upon him) said to Mu’aadh ibn Jabal, when he sent him to Yemen: “Teach them that Allah has enjoined upon them zakah on their wealth, to be taken from their rich and given to their poor.” The Prophet (peace and blessings of Allah be upon him) explained that zakah is something which is to be taken and given, so on this basis it is not permissible to let off someone who owes you money and count that as zakah, because letting someone off a debt does not involve taking and giving. 
Shaykh al-Islam mentioned this issue and said: letting someone off a debt does not relieve one of the obligation of zakah, and there is no scholarly dispute on this matter. But you can give this needy person some of your zakah and he can meet his needs using what you give him as zakah; and Allah will help him to pay off his debt in the future, in sha Allah.