9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (11) TMI 892 - AT - Income TaxAdditions u/s 41(1) - cessation of liability - assessee claimed setoff with sundry debtors - Held that - the assessee has not booked the income receivable from sundry debtors i.e. ETV Kannada during the relevant year i.e. A.Y. 2003-04. The assessee has not written off the said debt. Hence, at this stage there cannot be any automatic set off of the amounts relating to amounts payable to sundry creditors against the amount receivable from sundry debtors. - Decided against the assessee.
Issues Involved
1. Addition of Rs. 19,87,927/- to the income of the assessee under section 41(1) of the Income Tax Act due to non-payment to sundry creditors. 2. Deletion of addition of Rs. 33,09,640/- made by the AO on account of "share application money" received from the year 2000 to 2005. Detailed Analysis Issue 1: Addition of Rs. 19,87,927/- to the Income of the Assessee under Section 41(1) The assessee challenged the addition of Rs. 19,87,927/- made by the AO, arguing that the CIT(A) erred in confirming the action without appreciating that the AO did not provide sufficient time to gather details of sundry creditors outstanding for more than eight years. The assessee also contended that the expenses not paid were capitalized and carried to the balance sheet as stocks and that the special nature of their business, which involves the production of television serials, was not considered. The CIT(A) upheld the AO's addition, stating that the assessee failed to provide confirmations or details of the sundry creditors, indicating a reluctance to pay the outstanding amounts. The CIT(A) noted that the assessee's argument that calling for confirmations would allow creditors to take legal steps to recover money was indicative of their reluctance to pay. The Tribunal agreed with the CIT(A), noting that the assessee had ample time to provide the necessary details but failed to do so. The Tribunal also rejected the assessee's argument for setting off the amount added to income against the non-receipt from sundry debtors, as there was no evidence that the income receivable from ETV Kannada was booked during the relevant year. The Tribunal referred to the Delhi High Court's decision in "CIT vs. Chipsoft Technology (P.) Ltd." which held that liabilities that become time-barred and result in a benefit to the assessee qualify as a cessation of liability under section 41(1). The Tribunal upheld the CIT(A)'s findings, stating that the assessee failed to prove the identity and genuineness of the creditors and had no intention to pay back the debts. Issue 2: Deletion of Addition of Rs. 33,09,640/- Made by the AO on Account of "Share Application Money" The revenue challenged the deletion of Rs. 33,09,640/- made by the AO, arguing that the assessee failed to appropriate the moneys towards share capital from 2000 onwards and that the conditions specified under section 41(1) were not met as the moneys were received from the Directors/Shareholders. The CIT(A) deleted the addition, noting that the money was received from the Directors/Shareholders and was a capital receipt, not a trading liability. The CIT(A) stated that the liability had not ceased even though it was barred by law, as the assessee had not written off the liability, nor was there any cessation of liability from the said parties. The Tribunal upheld the CIT(A)'s order, agreeing that the amount was received from Directors and Shareholders, and the assessee had produced confirmations from the creditors. The Tribunal found no evidence that the assessee had no intention to pay back the debt and thus upheld the deletion of the addition of Rs. 33,09,640/-. Conclusion In conclusion, both the appeals, one filed by the assessee and the other by the revenue, were dismissed. The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 33,09,640/- on account of "share application money" and confirmed the addition of Rs. 19,87,927/- made by the AO under section 41(1) for non-payment to sundry creditors. The Tribunal emphasized the importance of providing necessary details and confirmations to substantiate claims and the legal implications of time-barred liabilities under section 41(1).
|
