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TMI Blog2017 (11) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... later year with a reference to the liability earlier allowed as deduction. The section does not envisage this situation when there is no allowance or deduction and that to be in the nature of loss, expenditure or trading liability. Here in this case we have already held that no such allowance or deduction of trading liability has been allowed in earlier year in the case of the assessee while computing the business income and such a writing off by Air India cannot be reckoned as any benefit to the assessee within the terms and scope of section 41(1), because there is no question of any double deduction or double benefit derived to the assessee. Thus, we hold that no amount can be taxed under section 41(1) and therefore, the amount is directed to be deleted. - Decided in favour of assessee. - I.T.A. No.2476 And 2477/DEL/2014 - - - Dated:- 10-11-2017 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER For The Appellant : Shri P.K. Sahu, Advocate For The Respondent : Smt. Aparna Karan, CIT (DR) ORDER PER AMIT SHUKLA, J.M.: The aforesaid appeals have been filed by the assessee against separate impugned order of even date, 3/2/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Alliance Air); and is 100% subsidiary of Air India Limited (earlier known as NACIL and prior to that Indian Airlines). The Assessing Officer, on a perusal of the note given in the Auditors report, noted that NACIL had intimated vide letter dated 21/3/2008, that an amount of ₹ 306.75 crores owing from the assessee as on 31/3/2007 had been written off in their books of that year, i.e., AY 2007-08. The relevant text of the report, as appearing in the Auditors report, reads as under:- NACIL Vide its letter dated 21 March, 2008 had intimated that an amount of ₹ 30675.17 lakhs owing from AASL as on 31st March, 2007 had been Written off in the books of that year of erstwhile Indian Airlines (now NACIL) as a conservative measure and the write off did not prejudice NACIL s right to recover the same from Alliance Air in future. However as per the books of AASL, the amount payable to NACIL as on 31.03.2007 was ₹ 30374.24 lakhs, which had been then correspondingly written back based on expert opinion. Same position is continued in the books of AASL as on 31.03.2008 also. 6. The Assessing Officer, on the basis of the above note in Audit Report, observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant to the AY 2012-13 and this fact was intimated to the assessee vide letter dated 14/3/2012, copy of which was filed by the assessee during the course of assessment proceedings for the assessment year 2010- 11 and the same was filed again before the ld. CIT(A) by way of additional evidence. * Thirdly, there is no cessation of liability as NACIL has now written back the entire amount on 31/03/2012 which was earlier written off by them; therefore, liability even in the books of NACIL still exists; and * Lastly, writing off of the amount took place in financial year 2006-07 relevant to the assessment year 2007-08 and, therefore, no addition could have been made in assessment year 2008-09. Besides this, various decisions were also relied upon, which has been dealt by the ld. CIT (Appeal) from pages 7 to 9 of the appellate order. 8. The ld. CIT (A), first of all, took note of the findings given by his predecessor CIT (A) in the earlier round of proceedings, which has been incorporated by him from pages 10 to 16 of his order. Based on similar lines and reasoning, he held that the Assessing Officer has rightly tax the said amount of ₹ 306.75 crores under the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue that amount was written off by NACIL in assessment year 2007-08, therefore, could not have been taxed in this year in the hands of the assessee, ld. CIT(A) held that it does not hold a good ground because intimation of write off by NACIL/ Air India to the assessee, is vide letter dated 21/3/2008 which falls in assessment year 2008-09 and, therefore, the year of taxability under section 41(1) would be the year in which the said letter was received by the assessee. Thereafter, he has tried to distinguish the judgments relied upon by the assessee. 9. Before us, the ld. counsel for the assessee, Shri P.K. Sahu, after explaining the entire facts, submitted that the said amount could not have been taxed under section 4(1) for the reason that, firstly, it was not in the nature of allowance or deduction that has been made in assessment year for any year in respect of loss or expenditure or trading liability incurred by the assessee, albeit it was advance received from Air India. Therefore, on the face of it, provisions of section 41(1) cannot be invoked. Secondly, unilateral action by Air India does not mean that there is no debt or liability to pay or NACIL/Air India has given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Aey Gee Bros. vs. ITO, 130 TTJ 54 (Mumbai) 11. We have heard the rival submissions, perused the relevant finding given in the impugned order as well as the material on record. The assessee is 100% subsidiary of Air India which is public sector under taking. The sole basis for taxing the amount of ₹ 3,06,75,17,000/- by the Assessing Officer and confirmed by the Ld. CIT(A) under section 41(1) is that, NACIL (Now Air India and prior to that Indian Airlines) vide their letter dated 21/3/2008 had intimated to the assessee that the said amount of ₹ 306.75 crores owing from the assessee as on 31/3/2007 had been written off in their books of account of that year, i.e., financial year 2006-07. However, in the said letter itself, it was also mentioned that write off did not prejudice the NACIL s right to recover the same from the assessee in future. Since assessee had not written back the said amount and had still shown as advance received in its books, the Ld. AO and CIT (A) still held that it amounts to cessation/ remission of liability within the scope of section 41(1), therefore, the same has to be taxed. Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch benefit is arrived, then value of benefit accrued to him is deemed to be the profits and gains of the business or profession, which is chargeable to income-tax as the income of that previous year, that is, in the year in which benefit such derived by the assessee. Explanation 1 provides that loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation shall be includible by a unilateral act by the first person who is assessee, i.e., debtor. There is no stipulation of such unilateral act by the creditor. Here in this case, Explanation 1 cannot be held to be attracted at all, since there was no writing-off of the liability by the assessee to pay to the creditors in the assessee s account and the observation and the finding of the ld. CIT (A) that the scope of Explanation 1 should be enlarged to include unilateral writing-off by the creditor cannot be upheld as one cannot traverse beyond what has been contemplated in the statute. If the Explanation envisages a taxing of the trading liability by way of cessation or remission on account of unilateral writing off by the assessee, that is, debtor then it cannot be imported to mean to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit in other contentions of the Ld. Counsel that addition under section 41(1) cannot be made because writing off of advance money was done in the financial year 2006-07 relevant to the assessment year 2007-08, therefore, the said remission or cessation, if at all, cannot be held to be taxable in the relevant assessment year, i.e., assessment year 2008-09. Once the amount has been written-off in the previous year relevant to the AY 2007-08 by Air India, then same cannot be taxed by the Assessing Officer in this year and simply because a letter was written by Air India to the assessee in this year, it cannot cannot lead to an inference that benefit of such remission or cessation has been derived in this year or will determine the year of taxability. In the judgment of Hon'ble Gujarat High Court in the case of Pr. Commissioner of Incometax, Ahmedabad vs. Matruprasad C Pandey (supra), the Court held that addition under section 41(1) can be made only when it is found that there was a remission and/or cessation of the liability that too during the previous year relevant to the assessment year in question and once there is no remission or cessation of liability in this year, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not envisage this situation when there is no allowance or deduction and that to be in the nature of loss, expenditure or trading liability. Here in this case we have already held that no such allowance or deduction of trading liability has been allowed in earlier year in the case of the assessee while computing the business income and such a writing off by Air India cannot be reckoned as any benefit to the assessee within the terms and scope of section 41(1), because there is no question of any double deduction or double benefit derived to the assessee. Thus, we hold that no amount can be taxed under section 41(1) and therefore, the amount of ₹ 3,06,75,17,000/- is directed to be deleted. 17. Similarly, in assessment year 2010-11 the facts are exactly same. The only difference is in the figures, i.e., here in this year also amount of ₹ 235.54 crores was received by the assessee by way of advance from NACIL/Air India, which has been unilaterally written off by NACIL in their books in financial year 2008-09 relevant to the assessment year 2009-10. The year-wise breakup of liability written off by NACIL was as follows:- 1 F.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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