9911796707
TMI Blog2012 (3) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 41(1) of the Act inter alia recording as under: - "As per the information available during the Assessment Proceeding, it is found that Rs.50 Lacs (Rs.Fifty Lakhs) has been lying in the form of provision as Contingency Amount in the Liability side of the Balance Sheet read with Schedule 7 of the Audited Accounts. The Assessee was asked to explain and justify continuance of this Contingent Liability. In reply, it has been emphasized by the Assessee that pursuing to scheme of arrangement of Siel Ltd., approved by High Court of Delhi vide order dated 26.08.2003, our company had received certain Investment as Assets and also certain Liabilities. It further submitted that the Assessee Company has to disposed off the Investment and discharge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired certain investments as well as certain liabilities under the Scheme of arrangement of M/s. Siel Ltd. approved by Delhi High Court by order dated 26/08/2003, w.e.f. 10/10/02. While entering the investment as well as the liability in the books of the appellant company, a provision for Rs.50,00,0000/- (sic) (Rs.50,00,000/-) for contingency was made. This is not trading liability rather it was the liability made out of capital account and Sec. 41(1) has no applicability in the present context. The AO has expressed his apprehension in page 5 of the order that such amount was not debited to the erstwhile company i.e. M/s. Siel Ltd. The appellant has enclosed a certificate from Siel Ltd. (P-18) of written submission dated 25/06/10 where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicates that the section is attracted only in respect of expenditure or liability incurred by the assessee where the assessee had obtained any benefit in earlier assessment year. Here we find that assessee has categorically stated that it has not made the provision by way of debit of the profit and loss account. Ld. counsel of the assessee also produced before us the balance sheet and profit & loss account by the earlier period, when the entries were transacted. It was also shown that the same was routed through balance sheet only. A perusal of the account for the period ending 31.3.2003 showed that the same was made by increasing investment by Rs.50 lacs and creating provision for contingency by Rs.50 lacs. Thus, in this background the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .03.2003 as is clear from the foot note to Schedule 3 relating to "investment" wherein the figure taken was Rs.35.50 crores and Schedule 5 relating to "current liabilities and provision" in which the provision for contingency of Rs.50 lakhs has been explained as "provision of contingency is yet to be incurred". In Schedule 6 under Notes this factum has been mentioned and details have been stated. It is thus clear that the provision had not been, and could not have been, debited to the P & L A/c of SIEL Ltd. This provision was created by the assessee for the first time. In view of the aforesaid position, we fail to understand how Rs.50 lacs can be added as income by invoking Section 41(1) of the Act. On this aspect we do not find any substan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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