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TMI Blog2010 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... credited in the books of the assessee to the capital reserve account. – AO brought the aforesaid difference of Rs.1.29 Crores to tax under Section 41(1) of the Income Tax Act 1961. Held that: Having regard both to the order passed by the Sales Tax Tribunal on 8 February 2008 and the notice of demand issued on 22 July 2008, it is not possible for the Court to accept the contention that there was a remission or cessation of liability. Since the record before the Court does not disclose that there was a remission or cessation of liability, one of the requirements spelt out for the applicability of Section 41(1)(a) has not been fulfilled in the facts of the present case. – Question of law answered in favor of assessee - 1511, 1512, 2368, 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected an amount of Rs.1,79,68,846/towards sales tax. Under the scheme the amount was payable in five annual installments commencing from April 2010 and the liability was treated as an unsecured loan in the books of account of the assessee. The State Industrial and Investment Corporation Of Maharashtra Limited (SICOM) offered to the assessee an option for the settlement of the deferred sales tax liability by an immediate one time payment. The assessee paid an amount of Rs.50,44,280/to SICOM which according to the assessee represented the net present value as determined by SICOM. Payment was made by the assessee to SICOM on 26 June 2000. The difference between the deferred sales tax and its present value amounting to Rs.1.29 Crores was tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 254 would be rendered redundant. 5. On behalf of the assessee, learned senior counsel submitted that the principal requirement for the applicability of Section 41 is that the assessee must obtain a benefit in respect of a trading liability by way of a remission or cessation thereof. The two submissions which have been urged on behalf of the assessee are that (i) there was no cessation of the liability of the assessee in the present case in respect of the payment of the sale tax dues; and (ii) assuming that there was a cessation, no benefit was obtained by the assessee. The submission which has been urged on behalf of the assessee is that as a matter of fact the issue pertaining to the sales tax liability was decided by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first mentioned person) and subsequently during any previous year ( a) the first mentioned person has obtained, whether in cash or in any other manner whatsoever, 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 such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order on 18 March 2004 did not consider the amount paid to SICOM as repayment of the deferred liability of the assessee to the extent of Rs.1.79 Crores under the Bombay Sales Tax Act, 1959 and Central Sales Tax Act, 1956. The appeals filed by the assessee before the Deputy Commissioner of Sales Tax were dismissed upon which the assessee filed a second appeal before the Maharashtra Sales Tax Tribunal. The Tribunal, by its judgment dated 8 February 2008 upheld the order of the lower authorities of not giving credit of the payment made by the assessee to SICOM. In these proceedings, neither the validity of the order passed by the Sales Tax Tribunal nor for that matter the correctness of the reasons that weighed with the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008, it is not possible for the Court to accept the contention that there was a remission or cessation of liability. Since the record before the Court does not disclose that there was a remission or cessation of liability, one of the requirements spelt out for the applicability of Section 41(1)(a) has not been fulfilled in the facts of the present case. 11. In the view that we have taken it is not necessary for the Court to address itself to the wider issue as to whether the assessee, in paying the net present value of the deferred sales tax liability should be regarded as having obtained any benefit within the meaning of Clause (a) of sub section (1) of Section 41. The aforesaid issue is kept open to be adjudicated upon at the appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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