1981 (2) TMI 118 - AT - Income Tax

Summary

Issues:
1. Whether there was a cessation of liability or remission under section 41(1) of the IT Act, 1961 for the assessment years 1971-72 and 1973-74.
2. Whether the transfer of unclaimed and unpaid liability to the profit and loss account brings about cessation or remission of the liability.
3. Whether the decisions of various Courts on similar matters apply to the current case.

Analysis:
The judgment by the Appellate Tribunal ITAT CALCUTTA-E pertains to two appeals by the Revenue against the same assessee for the assessment years 1971-72 and 1973-74. The appeals were consolidated due to the similarity in facts and reasoning. The main contention was regarding the cessation of liability or remission under section 41(1) of the IT Act, 1961. The first appellate authority held that there was no cessation of liability or remission, and the transfer of unclaimed wages to the profit and loss account did not automatically bring about cessation of liability. The Tribunal also referred to various court decisions emphasizing that the mere expiry of the limitation period does not constitute the cessation of liability.

In the case of unclaimed wages for the year 1967, the Tribunal observed that the transfer of such amounts to the profit and loss account by the debtor does not result in the remission of liability unless granted by the creditor. The Tribunal highlighted that the subsistence of debt or liability is not affected by the expiry of the limitation period. The Tribunal also mentioned that the debtor's unilateral act of transferring the liability does not bring about cessation or remission of the liability unless agreed upon by the creditor. The Tribunal relied on previous orders and court decisions to support the conclusion that the transfer of entries alone does not lead to the cessation of liability.

The Tribunal further noted that no new material was presented to warrant a departure from the conclusions reached in previous cases involving the same assessee. The Tribunal upheld the decision of the first appellate authority based on the order of the Tribunal in a previous assessment year, where it was held that there was no cessation of liability and the amounts could not be added to the assessee's income for tax purposes. Consequently, both appeals by the Revenue were dismissed, affirming that there was no cessation of liability or remission under section 41(1) of the IT Act, 1961 for the relevant assessment years.