9911796707
TMI Blog2002 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... d under section 256(1) of the Income-tax Act, 1961, for the opinion of the High Court: "Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that Rs.3,02,758 cannot be brought to tax and in deleting the addition of Rs.3,02,758 sustained by the Commissioner of Income-tax (Appeals)?" The High Court accepted the view of the Tribunal which partly allowed the appeal of the assessee and answered the question in favour of the assessee. The facts in brief are: The respondent-assessee is engaged in the business of tea, spices, etc. During the assessment year 1985-86 (previous year ending on March 31, 1985), the assessee "Wrote back" in its accounts a sum of Rs.14,65,997 representing the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ker), in November, 1984. Certain observations were also made as regards the includibility of the sums pertaining to the assessment years 1980-81 and 1981-82 in respect of which reassessments were made. However, in this appeal, we need not go into the details thereof. On further appeal by the assessee, the Tribunal set aside the addition of Rs.3,02,758 which was upheld by the Appellate Commissioner. The Tribunal did not agree with the view taken by the first appellate authority that there was cessation of liability within the meaning of section 41(1) of the Income-tax Act during the relevant year on account of dismissal of the S.L.P. in another case. The Tribunal observed that for claiming exemption from purchase tax on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason it be. The question is whether the circumstances contemplated by section 41(1) exist so as to enable the Revenue to take back what has been allowed earlier as business expenditure and to include such amount in the income of the relevant assessment year, i.e., 1985 86. In order to apply section 41(1) in the context of the facts obtaining in the present case, the following points are to be kept in view: (1) In the course of assessment for an earlier year, allowance or deduction has been made in respect of trading liability incurred by the assessee; (2) Subsequently, a benefit is obtained in respect of such trading liability by way of remission or cessation thereof during the year in which such event occurred; (3) in that situation the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,20,758 deeming the same as income of the year 1985-86 under section 41(1) is well justified of the Act. But, what the assessee has done is not conclusive. As observed by the Tribunal, a unilateral action on the part of the assessee by way of writing-off the liability in its accounts does not necessarily mean that the liability ceased in the eye of law. In fact, this is the view taken by this court in CIT v. Sugauli Sugar Works (P.) Ltd. [1999] 236 ITR 518. We, therefore, find no substance in the contention advanced on behalf of the appellant. Incidentally, we may mention that the controversy relates to the period anterior to the introduction of Explanation 1 to section 41(1). The decision of this court in CIT v. T.V. Sundaram Iyengar and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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