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TMI Blog2013 (2) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... justed towards the commission payable to the assessee by M/s IMC. The fact that no confirmation was filed from M/s IMC cannot lead to the conclusion that there was a cessation or remission of liability of the assessee warranting invocation of provisions of sec.41(1). The reliance placed by the Assessee on the decision of CIT v. Shri Vardhman Overseas Ltd. [2011 (12) TMI 77 - DELHI HIGH COURT] supports the plea of the Assessee. In that case the Assessee wrote of the liability by crediting the amounts outstanding in the profit and loss account but showed them as liability in the Balance Sheet confirming a fact that the liability is reflected in the balance sheet of the Assessee was an acknowledgement of liability which can be relied upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 2008-09, the assessee filed return of income declaring a total income of Rs. 25,51,750/-. The AO found from the balance sheet of the assessee that on 31-03-2008, a sum of Rs. 55,21,457.86 was reflected in the name of M/s International Metal and Chemicals, USA (M/s IMC), as sundry creditors. As on 31-03-2007 the amount payable to the aforesaid parties was Rs. 25,30,792.86. The AO called upon the assessee to give a confirmation from the creditor. The assessee submitted that in respect of the opening balance as on 31-03-2007 of Rs. 25,30,792.86, the same was with held by M/s IMC because of some dispute between M/s IMC and M/s Synergy Dooray Automative Ltd (hereinafter referred to as M/s Synergy, Visakapatnam). The assessee also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2007-08. 6. The Assessee further submitted that M/s IMC wanted to diversify its business in India and were looking for certain other Indian customers to market their product. M/s IMC approached the Assessee to look for an Indian customer for its products and the appellant identified M/s Synergy, Vishakapatnam. M/s IMC started supplying its goods to M/s Synergy, Vishakapatnam and M/s IMC was carrying on its business with M/s Synergy, Vishakapatnam. The assessee was to receive commission for identifying the Indian customer on fulfillment of the terms and conditions. The quantum of the commission was not finalized. 7. The Assessee pointed out that the AO erroneously concluded that the Assessee withheld the amount of Rs. 25,30,792.86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 25,30,792.86 made by the AO by invoking the provisions of sec.41(1)(a) of the Act cannot be sustained. 10. The CIT(A) firstly, held that the assessee did not file any confirmation of outstanding dues to M/s IMC. The CIT(A) thereafter found that as on 01-04-2007, there was a opening balance of Rs. 25,30,792.86 and this continued even in FY: 2008-09 and 2009. The CIT(A) was therefore, of the view that the assessee was with holding the aforesaid sum because, it had to receive commission from M/s IMC in respect of the transaction between M/s IMC and M/s Synergy, Visakapatnam. The CIT(A) also noticed that the assessee had also filed a winding up petition against M/s Synergy, Vishakapatnam, on behalf of M/s IMC. Therefore, the CIT(A) was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility, it is chargeable to tax. Sec.41(1) actually contains two limbs and caters to two different situation; (a) Where an allowance or deduction has been made in respect of any loss expenditure incurred by the assessee in an earlier year, and subsequently, the assessee receives any amount in respect of such loss or expenditure in a later year. (b) Where an allowance or deduction has been made in respect of any trading liability incurred by the assessee in an earlier year, and in later year, and in a later year, the assessee receives any benefit in respect of such trading liability by way of remission or cessation thereof. Sec.41(1) is a deeming fiction and seeks to tax receipt or benefit which may not strictly be 'income', the burd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Shri Vardhman Overseas Ltd. [2012] 343 ITR 408 supports the plea of the Assessee. In that case the Assessee wrote of the liability by crediting the amounts outstanding in the profit and loss account but showed them as liability in the Balance Sheet. The Hon'ble Delhi High Court held that the fact that the liability is reflected in the balance sheet of the Assessee was an acknowledgement of liability which can be relied upon by the credit for saving limitation of time for action by legal proceedings u/s.18 of the Limitation Act, 1963. In the present case there is not even such a write off in the profit and loss account. In such circumstances, we are of the view that the action of the revenue authorities in brining to tax the disputed amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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