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Issues involved: Assessment of unclaimed amounts as income u/s 41(1) of the Income-tax Act, 1961 for the assessment year 1970-71.
Summary: The High Court of Allahabad considered the case where an assessee in the road transport business transferred a sum of Rs. 24,869 to its profit and loss account on 31st March, 1970, comprising unclaimed wages and amounts due to certain persons. The Income-tax Officer included this sum in the assessee's income, deeming it taxable. The Appellate Assistant Commissioner, however, ruled in favor of the assessee, stating that until three years after 31st March, 1970, the liability to pay remained with the assessee. The Tribunal, on appeal by the Income-tax Officer, observed that the assessee treated the amounts as income by transferring them to the profit and loss account, thus making it taxable income without the need for deeming provisions of section 41(1) of the Act. The Tribunal referred the question of assessability of the sum of Rs. 24,869 u/s 41(1) to the High Court. The High Court noted that the assessee treated the amounts as income, satisfying the conditions under Bhagwat Prasad and Co. v. Commissioner of Income-tax. It emphasized that the expiry of the limitation period does not extinguish the debt, and in this case, the debt was not time-barred at least for three years from 31st March, 1970. The High Court distinguished other cases cited by the assessee, emphasizing the similarity to Pioneer Consolidated Company of India Ltd. v. Commissioner of Income-tax, where the transfer to the profit and loss account was considered prima facie evidence of income. In conclusion, the High Court answered the question in the affirmative, in favor of the department, allowing the assessment of the amounts under section 41(1) of the Act. The Commissioner of Income-tax was awarded costs amounting to Rs. 200.
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