9911796707
TMI Blog1994 (1) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... -73 in spite of no demand notice for the assessment having been received by the assessee either in the relevant years or subsequently and having been allowed by way of deductions in the assessments for these assessment years is not assessable under section 41 of the Income-tax Act, in the assessment year 1973-74 in spite of the fact that no demand notice was received the said amount was written back to the profit loss account on the ground the Zonal Development Council was not consulted in the relevant years thereby showing the assessee itself had treated the sum of ₹ 7,77,175 as no longer a debt or liability payable by it ? 2. The facts as found by the Tribunal are briefly stated as under: The Government of Bihar promulgated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing to show that there was a cessation of the liability for a sum of ₹ 7,77,175. 4. The AAC particularly relied upon the letter dated 16-1-1975 written by the State Government by which it was pointed out that steps should be taken against the sugar factories to get the amount deposited in National Savings Account. On the basis of the aforesaid letter, the AAC pointed out that it cannot be said that there was a cessation of the liability and deleted the said amount which was taken by the ITO as the deemed income. The Tribunal followed the said order of the AAC. On further appeal to the Tribunal, the Tribunal held that the liability of the assessee did not cease to exist and as such, this could not be assessed as income under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not paid. As the Zonal Council by then had not been constituted, the said commission debited has been written back to the profit and loss account in the accounts for the instant previous year relevant to the assessment year 1973-74. The amount so written back was the aggregate sum of ₹ 7,77,175. It is urged on behalf of the revenue that the facts clearly show that there was a cessation of liability which alone could lead the assessee to credit the provision for the earlier year to the profit of the instant year. 6. The counsel for the assessee placed reliance on the judgment of the Supreme Court in India Discount Co. Ltd.'s case (supra). There, the Supreme Court held that when the assessee enters into a contract not only to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ordinance, 1959. In order that an amount is deemed to be the income under section 41(1) of the 1961 Act, there must be a remission or a cessation of the liability in respect of the said amount. The benefit contemplated by the section must be by way of remission or cessation of the liability and no other benefit is contemplated under the section. The transfer of an entry in the accounts is a unilateral act and does not bring about the cessation of the liability of the debtor. Therefore, by mere appropriation of an amount by reversal of the entry in the Profit and Loss Account for the relevant year, there is no cessation of the liability. The cessation of a liability can arise only when the liability ceases to exist in the eye of law to all i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for cessation of liability within its meaning under section 41(1). It is not the case that the State Government remitted the liability or terminated the liability so as to result in its cessation or remission. The only thing which the revenue seeks to rely upon so heavily, is the assessee's act in writing back the collection to the profit and loss account. Obviously, the assessee had acted wrongly and the collection is not open to be appropriated as profit by the assessee under the statute. The requirement of statute never ceased. It is still in operation as is evident from the direction issued by the Cane Commissioner. The facts of the case are so straight forward that it can be said that the conclusion is quite easy. It is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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