9911796707
|
Home
Issues involved: Interpretation of section 41(1) of the Income-tax Act, 1961 regarding unclaimed liabilities written back in profit and loss account.
Summary: The High Court of Punjab and Haryana addressed the controversy surrounding unclaimed liabilities of Rs. 48,610 written back by the assessee in its profit and loss account. The main issue was whether this amount represented cessation or remission of the assessee's liabilities as per section 41(1) of the Income-tax Act, 1961. The assessee, Lal Textile Finishing Mills (P.) Ltd., included Rs. 48,610 on its income side, arguing that it did not constitute cessation or remission of liabilities under section 41(1) and thus should be deductible. The Inspecting Assistant Commissioner and the Commissioner of Income-tax (Appeals) disagreed with the assessee, but the Tribunal ruled in favor of the assessee, stating that the amount could not be included in taxable income for the relevant assessment year. Referring to the case law CIT v. Haryana Co-operative Sugar Mills Ltd., the court highlighted that for an amount to be taxed under section 41(1), it must have been allowed as a deduction in a previous year and the assessee must have received a benefit from cessation or remission of the liability during the current assessment year. In this case, it was crucial to note that there was no evidence that the amount of Rs. 48,610 had been allowed as a deduction in any earlier assessment year. Therefore, the court concluded that this amount could not be taxed under section 41(1) of the Act. The reference was answered in favor of the assessee and against the Revenue, with no order as to costs.
|
