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TMI Blog2010 (4) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... n the account of Sh. Parmanand was changed from “other suppliers” to “Sh. Parmanand” in the audited financial statement of the appellant company for the years 1997-98 and 1998-99. – held that – It is a pre-requisite condition before taking recourse to the Section 41 of the Act that that assessee must have either obtained the amount in respect of the loss, expenditure or trading liability incurred earlier by it or it should have received any benefit in respect of such trading liability by way of remission or cessation thereof. - Mere change of nomenclature in the books of account without anything more brings no benefit to the assessee and its liability to pay to the creditor does not get extinguished, merely by change of nomenclature or by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce was shown in the books of account of the Assessing Company under the sub-head "other supplier", of main-head "sundry creditors". Since the purchases were being handled by Sh. Parmanand, it was decided by the company to make the matter simple by transferring the aforesaid credit balance to Sh. Parmanand and, therefore, nomenclature of the aforesaid outstanding balance of Rs.11,81,045/- in the account of Sh. Parmanand was changed from "other suppliers" to "Sh. Parmanand" in the audited financial statement of the appellant company for the years 1997-98 and 1998-99. 3. The Assessing Officer was of the view that transfer of the account of sundry creditors by way of a book entry in the name of Sh. Parmanand constituted cessation of liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent it is relevant, provides that where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year the assessee has obtained whether in cash or in any other manner, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by the assessee from the value of the benefit accrued to him shall be deemed to be profits and gains of profession or business, and accordingly chargeable to Income Tax, as the income of that previous year. 6. It is, therefore, a pre-requisite condition before taking recourse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more brings no benefit to the assessee and its liability to pay to the creditor does not get extinguished, merely by change of nomenclature or by change of the sub-head under which the liability is shown in the account books of the assessee. What is relevant is that the liability of the assessee to pay the amount of Rs.11,81,045/- to its creditor(s) did not come to an end merely on account of the aforesaid change in the sub-head under which the liability was shown in the account books. Transfer of liability from one sub-head to another does not absolve the assessee of its obligation to pay that amount. There is no cessation of liability in such a case and the company still remains liable to its assessee. It cannot be said that the creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability to make payment of this liability and actually discharged it at a later date by issuing shares to the legal heirs of late Sh. Parmanand against it. In fact, the conduct of the assessee in adjusting this amount towards share money is a strong indicator that the liability had not ceased merely on account of its transfer from one sub-head to another. 11. In any case, the question whether there was cessation of liability within the meaning of Section 41 or not is a question of fact which the Tribunal has concluded in favour of the assessee. In Commissioner of Income-Tax vs. Autopins (India) 192 ITR 161, the Tribunal returned a finding that certain payments made by the assessee to its workmen were incurred for the purpose of busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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