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TMI Blog2012 (3) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961?" 2. This appeal by the Revenue pertains to assessment year 1987-88 in the case of Bharatpur Nutritional Products Limited(formerly known as Dalmia Industries Limited). 3. As a short and limited issue arises for consideration, we need not set out the facts in detail. 4. During the period relevant to the assessment year, the respondent assessee had received Rs.42,05,173/- from the Excise Department as refund of excise duty paid. The Assessing Officer included this amount in the profit and loss account and accordingly computed the taxable income. The aforesaid addition was deleted by the CIT(Appeals) and the said order has been affirmed by the impugned order passed by the Income Tax Appellate Tribunal (tribunal, for short) date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 him 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 that year or not." 7. The aforesaid Section was elucidated and examined by the Supreme Court in the case of Polyflex (India) Private Limited versus Commissioner of Income Tax, (2002) 257 ITR 343 (SC). The Supreme Court in the said case observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Polyflex (India) Private Limited (supra) are identical or similar to the facts in the present case. In the said case also there was a dispute between the assessee and the Excise Department and the duty which was paid had been refunded but the Excise Department had preferred a SLP before the Supreme Court. The fate of the SLP was not known. The dispute, therefore, was pending before the appellate forum. In the present case also, as per the facts noticed above, the dispute was pending before the appellate forum, i.e., the Division Bench but the excise duty had been refunded and paid to the assessee, subject to furnishing of the bank guarantee. In our view, the furnishing of bank guarantee itself when payment has been received, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards another part of the liability, the issue is pending before the Tribunal. It would, therefore, appear that no cessation of liability can be postulated until the Tribunal has decided the matter." The relevant facts are not mentioned in the judgment. The question whether the latter or earlier clause of section 41(1) applies did not arise for consideration in that case. The decision of the High Court which was the subject matter of appeal in this court is reported in J. K Synthetics Ltd. v. O. S. Bajpai, ITO [1976] 105 ITR 864 (All). From the facts stated therein it appears that there was no actual payment of duty nor any refund obtained by the assessee. The assessee-company was making provision in the books of account in respect of excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y cannot be said to have ceased because the judgment of the single judge of the High Court did not attain finality. Though the conclusion of the High Court which was affirmed by this court cannot be legally faulted, we cannot, however, approve of the following analysis of the section occurring in the judgment (page 881 of [1976] 105 ITR) : "In short, what this provision means is that if an assessee has been allowed a deduction in the computation of its total income of any liability on account of loss or expenditure and if, subsequently, the liability of the assessee on account of such loss or expenditure is remitted or ceases, that part of the liability which is remitted or ceases shall be treated to be the income of the assessee of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructure of the provision. That apart, the operation of the provision which is designed to have widest amplitude will get constricted and truncated by reason of such interpretation." 10. We may note that the Supreme Court in the aforesaid paragraphs has noticed that it was not a case of actual payment, i.e., expenditure but only a provision was made in the books of accounts in respect of the excise duty payable while disputing the liability to pay the duty. Therefore, it was a case of the trading liability and the question of cessation or remission of liability was relevant and material for deciding whether or not Section 41(1) of the Act is applicable. We have noticed the said distinction above. 11. In view of the aforesaid legal positio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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