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TMI Blog2012 (2) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... UDGMENT R.V. Easwar, J. These are six appeals filed by the revenue under Section 260A of the Income Tax Act (Act, for short). We have taken up ITA 964/2009 as the lead matter. In this appeal, the following substantial question of law was admitted on 22nd October, 2009:- "Whether ITAT was correct in law in deleting the addition made by the Assessing Officer on account of unclaimed credit balances written off by the assessee in its books of accounts for the year under consideration, invoking the provisions of Section 41(1) of the Income Tax Act." 2. The facts giving rise to the present appeal may be briefly noticed. The assessee is a public limited company engaged in the manufacture of IMFL, beer, mineral water, juices, breakfast food, glass bottles etc. For the assessment year 1995-96, a return was filed on 30th November, 1995 declaring income of Rs. 3,00,33,390/-. In the course of the assessment proceedings under Section 143(3) of the Act, the Assessing Officer made several additions and disallowances to the returned income. Included in them was an amount of Rs. 17,39,263/-. This amount represented the aggregate of several items written back by the assessee in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 329/. He noted that the amounts have been written back in the assessee's books of account after the period of limitation for recovery of the same had expired. According to him the amount represented a trading receipt which was initially adjusted by the assessee in its books of accounts and thus fell to be added as the assessee's income. As regards the rest of the items aggregating to Rs.6,36,693/- the assessee's plea that the provisions of Section 41(1) or Section 28(iv) were not applicable, was rejected by the Assessing Officer by observing in paragraph 15.6 of the assessment order as follows:- "15.6 I have carefully considered the assessee's reply and do not agree with it. Details of these expenses clearly show that these expenses are allowable expenses under the Income-tax Act and the same have been claimed and allowed to the assessee in earlier years. In my considered view these expenses are fully covered with the provisions of section 41(1) of the Income-tax Act, and writing back of these amounts in the profit Loss Account definitely establishes that there has been a cessation of liability on the part of the assessee. The assessee has written back the amount only after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court. He also observed that that the assessee has obviously written back these liabilities as they have remained unclaimed for a long time and their recovery had become barred by limitation. Since these were also transferred to the profit and loss account, he held that they were rightly taxed under Section 41(1). 8. The CIT(A) separately dealt with the excess provision of Rs. 17,133/- made for doubtful debts which was written back in the accounts in the year under consideration. He noted that the provision had not been allowed in any of the earlier assessment years as a deduction and, therefore, held that Section 41(1) was not applicable in the year in which the provision was written back. He accordingly deleted the addition. 9. The following items of addition were separately dealt with by the CIT(A) in paragraph 13 of his order under the head "provisions for tax, duty etc. written back":- 1. Tax on immovable property for the year 1990-91 Written back: Rs. 3,730/- 2. Unclaimed bonus for earlier years written back: Rs. 14,133/- 3. Excess provision for excise duty for Assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 990-91, 1991-92, 1993-94, 1994-95, 1995-96 and 1996-97. So far as the additions that are disputed in the present appeals are concerned, the decision of the Tribunal for these years is contained in paragraph 12 of the aforesaid order, which is the impugned order. The Tribunal disposed of the issues in the following brief paragraph:- "12.The next dispute relates to unclaimed credit balances written back in the account of the customers and suppliers (A.Y. 1990-91 to 1996-97); salaries, wages bonus (A.Y. 1990-91 to 93-94); unencashed cheques (A.Y. 1990-91 to 93-94); and securities forfeited (A.Y. 1990-91 92-93). All these issues arose in earlier years also wherein the Tribunal has restored the matter back to the file of AO and the AO in set aside proceedings has deleted the disallowances made in this regard. In the light of this, such unilateral right of the unclaimed credit balances in the account of customers and suppliers; in the account of salaries, wages and uncashed cheques and securities forfeited, cannot be brought to tax u/s 41(1) of the Act. In fact in relation to the last two items, there has been no claim for deduction for invoking the provisions of sec. 41(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as added by the Finance (No.2) Act, 1996 with effect from 1st April, 1997. After the insertion of this Explanation, it is not open to the assessee to claim non-taxability on the ground that the writing off of the liability in his accounts cannot be treated as cessation of liability. The Explanation provides that the unilateral act of the assessee by way of writing off such liability in its accounts would be considered as remission or cessation of the liability. In circular No.762 dated 18th February, 1998 which is reported in (1998) 230 ITR (St.)12, the CBDT has explained the reason behind insertion the above Explanation. In paragraph 28.3 of the circular it has further been stated that the amendment will take effect from 1st April, 1997 and will, accordingly, apply in relation to assessment year 1997-98 and subsequent years. The Explanation, therefore, does not have any retrospective effect. It does not, therefore, apply to the assessment year 1995-96. For this reason, we hold that the mere writing back of the loan in relation to unclaimed salaries, wages and bonus cannot amount to cessation of the liability. This aspect of the matter has been considered by us elaborately in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are referring to this aspect only to highlight the kind of difficulties the High Court can face while hearing an appeal under Section 260A of the Act from the order of the Tribunal, if the order of the Tribunal does not contain the relevant facts, figures and the precise controversy arising in different assessment years. 18. As regards the excess provision for doubtful debts amounting to Rs. 17,133/- which has been written back, the finding of the CIT(A) that the provision was never allowed as a deduction in the earlier years. Since the finding that the provision was not allowed in the earlier year as a deduction is not under challenge, the amount cannot be added under Section 41(1) when it is written back in the accounts. The decision of the Tribunal is upheld. 19. Subject to the above observation, we answer the substantial question of law in the affirmative, against the revenue and in favour of the assessee. 20. The other appeals relate to the assessment years 1990-91, 1991-92, 1993-94, 1994-95 and 1996-97. The following table sets out the additions/disallowances in dispute in the appeals:- ITA NO. RELEVANT A.Y. ITEMS IN ISSUE UNDER ..... X X X X Extracts X X X X X X X X Extracts X X X X
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