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TMI Blog2018 (3) TMI 1193X X X X Extracts X X X X X X X X Extracts X X X X ..... an appeal filed by the assessee against the order of the CIT(A)- 1 Bhubaneswar dated 2.12.2016 for the assessment year 2010- 2011. 2. The sole issue involved in this appeal is that the CIT(A) erred in deleting the addition of ₹ 50,00,000/- on account of disallowance of cessation of loan. 3. The brief facts of the case are that the assessee is a wholly owned Government company engaged in industrial development in orissa and filed the return of income for the assessment year 2010-2011 on 28.9.2010 with NIL total income and subsequently filed the revised return on 29.6.2011 with total business loss of ₹ 6,56,56,115/-. The return was processed u/s.143(1) of the Act. During the course of assessment proceedings, the Assessing Officer found that out of total amount of ₹ 24,21,39,000/- credited to the profit and loss account, the assessee has deduced a sum of ₹ 50,00,000/- as exempt income while computing the total income. When asked by the Assessing Officer as to why the amount of ₹ 50,00,000/-was claimed as exempt, the assessee furnished its explanation with written submission on 26.2.3013 as under: During the construction period prior to 1990, OP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer for comments. The Assessing Officer in response to the assessee's written submission filed comments dated 24.2.2016 are as under: Assessment in this case was completed on dt.05.03.2013 determining the total income at Rs.NIL and book profit u/s 115JB ₹ 18,51,18,000/-. The impugned assessment was completed u/s 143(3) by way of addition u/s 41(1) of IT Act 1961 to the extent of ₹ 50 lakhs to the total income. The said amount of ₹ 50 lakhs was debited to the profit and loss account of the assessee during the previous year ending on 31.03.2010 relevant to the asst. year 2010-11 under the head Written back OPGC Loan . During the course of scrutiny assessment proceedings when it was asked that why the assessee has debited such amount from the net profit under the head Written back OPGC Loan thereafter, it is submitted by the assessee that:- During the construction period to 1990, OPGC had advanced some amount to IDCOL for supply of products/rendering of services by the subsidiary companies of IDCOL Group, i.e. HIWL and IPEWL. After adjustment of demands against supplies and services, a sum of ₹ 50 lakhs was lying outstanding on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the assessee is also inclusive in the purview of section 41(1) of the IT Act 1961 and is within the meaning of that section to which the assessee admitted suo motu through its explanation as above. As observed from the explanation on written submission produced during the course of remand proceedings at SI No. 1.3 it is submitted that in the context of waiver of loan, taxability would depend upon the purpose of which the loan was taken. Also a few documents in shape of Xerox copies have been produced with the written submission filed by the appellant assessee during the course of appeal proceedings. Primafacie scrutiny of those documents it appears to be those relates to transaction of loan by the party with IB Thermal Power Station, OPGC during the period 1999, 2000 to 2004. The explanation offered by the assessee in the rejoinder do not describe the details as claimed by it in the enclosures annexed with the rejoinder. The details of contents brought by the assessee in the post assessment proceedings are not verifiable in the light of the submission made by the assessee in the rejoinder. Also the documents appear to be older than for a period of 10-12 years ago. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year. A plain reading of the above section makes it clear that only such remission or cessation of liability can be taxed as profits in respect of which an allowance or deduction has been allowed in the assessment for any earlier year. It is clear from this that only trading liabilities or liabilities which have arisen having been debited the P L account in earlier years can be taxed as profits u/s.41(l). In the case of the assessee, the facts indicate that the amount written-off (written back by the assessee in its accounts) represents a part of the loan from OPGC which was taken long back. There is perhaps no dispute about this. The AO has not brought any materials on record to show that a deduction or allowance in respect of this amount of ₹ 50,00,000/- was allowed to the assessee in any earlier assessment year or years. On the facts of the case, the provisions of section 41(1) are found not applicable so far as the loan amount of ₹ 50,00,000/- is concerned. In view of this, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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