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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 ..... IV KHANNA, MR. JUSTICE R.V.EASWAR, JJ. For Appellant: Mr. Deepak Chopra, Sr. Standing Counsel Mr. Harpreet Singh Ajmani, Advocate. For Respondent: Mr. R.N. Mehta, Advocate. ORDER By order dated 22nd November, 2005, the following substantial question of law was framed: Whether on the facts and in the circumstances of the case the Tribunal was right in holding that excise duty refund received by the respondent-assessee was not assessable under Section 41(1) of the Income Tax Act, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t verify the fate of the said appeal. We will, therefore, proceed on the basis of the facts as recorded and found by the tribunal. 6. Section 41(1) of the Act, as it existed at the relevant time, was as under:- 41. Profits chargeable to tax. (1) 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 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically. The expressions remission or cessation apply only to the trading liability and not to cases of loss or expenditure. It has been accordingly held that in case of loss or expenditure where payment has been made either in cash or by any other manner whatsoever, the amount has to be included in the taxable income of the year in which the payment is received. It does not matter whether or not there is cessation or remission of liability in such cases. 8. We may notice that the facts 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 refunde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 14 (SC). One of the points urged before the court was-whether the assessee‟s liability towards excise duty had ceased justifying action under section 41(1). This court, while affirming the view taken by the High Court, observed thus (page 15) : So far as the second question is concerned, it is obvious that the liability to tax under section 41 of the Act will depend on the outcome of the appeal before this court. It is also stated that, as regards 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebar the company from claiming deduction on account of the excise duty being demanded from it and for which the com- pany had made provision in its books of accounts. The company is following the mercantile system of accounting and it can legitimately claim deduction in respect of a business liability even if such liability has not been quantified or paid. The High Court then held that the liability of the assessee as regards the payment of excise duty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of enquiry here. The correct way of understanding section 41(1) would be to read the latter clause- some benefit in respect of such trading liability by way of remission or cessation thereof as a distinct and self-contained provision. To read the phrase by way of remission or cessation thereof as governing the previous clause as well, i.e., obtained any amount in respect of such loss or expen- diture , would be doing violence to the language and structure 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 ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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