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TMI Blog2018 (5) TMI 419X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO u/s 41(1) of the IT Act without appreciating the fact that during the course of assessment proceedings the assessee failed to file any information/correspondence from the said creditors in respect of their claims, which are pending in the assessee's books for a long period." 3. "The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored." 4. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 3. The facts in brief are that assessee company is engaged in the business of manufacturing of engineering goods, however, for the year under consideration, the assessee has no business activity but reported some sale. Assessee has shown sundry creditors amounting to Rs. 3,50,91,205/- as on 31.03.2011 despite the fact that assessee has stopped the manufacturing activity a way long back. Therefore, during the course of assessment proceedings, the assessee was asked to show cause as to why not the credit balance of sundry creditors outstanding as on 31.03.2011 be disallowed and added to the total income of the assessee u/s 41(1) of the IT Act,1961.Assessee vide its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.H-2 in Tarapur Industrial area...."Thus, it is clear that the AO himself has not disputed that the transaction was in respect of "lease hold land". He has also not given any justification for treating the same as capital asset. 5.1.3 Under the circumstances, I find that the ratio of Hon'ble ITAT Mumbai in the case of Atul G Puranik vs ITO, 11 Taxmann 92 cited by the appellant applies with full force in the instant case. Provisions of section 50C{1) of Income Tax Act, 1961 pertains to capital assets .only. As per the ratio of jurisdictional ITAT mentioned above, leasehold land is not capital asset. Therefore, respectfully following the decision of Hon'ble ITAT, ground No.1 is allowed. In view if this, ground No. 2 is infructuous 5. Rival contentions have been heard and record perused. The issue under consideration is squarely covered by the decision of Bombay High Court in the case of Greenfield Hotels and Estates Pvt. Ltd., 389 ITR 68, wherein Hon'ble High Court observed as under:- This appeal under Section 260A of the Income Tax Act, 1961 ("the Act") challenges the order dated 23 October 2013 passed by the Income Tax Appellate Tribunal ("Tribunal"). The impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains to the addition of Rs. 7,52,781/- u/s 41(1) of the IT. Act. I find that identical issue was decided by Ld. CIT(A);s vide order No.CIT(A}-7/ ACIT-3(3)/IT-199/11-12 dated 23.05.2012 for A.Y. 2009-10. The relevant extracts from CIT(A)'s order are reproduced hereunder- "I also find that the AO merely invoked the provisions of section 41(1) of the Act based on the fact that the appellant company was showing its liability over a longer period. But having taken note of the AO's order and the appellant's submission, I find that the AO failed to establishes anywhere that the appellant company has got or obtained any benefit of such outstanding liability. Not only this,, he also not proved by any evidence or documents that there was any remission or cessation of such liabilities. Further the appellant company has nowhere made any? unilateral writing back of these liabilities, hence the question of applicability of section 41(1) of the Act does not arise in the case of the appellant. Further to that there is also no material on record to hold that the appellant's has no intention to pay to the creditors. In view of the same, I consider it proper and appropriate to hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration. The sundry creditors shown by the assessee in the year of origin having been accepted by the department, the genuineness of such transactions cannot be called into question in the impugned assessment year. As far as the allegation of the AO that liability on account of sundry creditors has ceased to exist in the assessment year in terms of section 41(1), on plain reading of the provisions of section 41(1) of the Act, we are of the view that before treating the amount outstanding towards sundry creditors as deemed income of the assessee u/s 41(1) on account of remission/cessation of liability, the AO is duty bound to examine whether the condition laid down u/s 41(1) are fulfilled or not. As per the reading of section 41(1) along with explanation (1) to section 41(1), the liability ceases to exist in the books of account of the assessee in a particular previous year, if the person showing such liability had obtained benefit either in cash or in any other manner in respect of such liability. It further provides that such remission or cessation of liability is also acceptable by unilateral act of writing off such liability in its account by the person showing such l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 of the Limitation Act, 1963 and, thus, the claim by M/s Elephanta Oil & Vanaspati Ltd. can also not be considered as time barred as the period of limitation would stand extended. Even, otherwise, it cannot be stated that M/s Elephanta Oil & Vanaspati Ltd. would be unable to claim a set-off on account of the amount reflected as payable to it by the assessee. Admittedly, winding up proceedings against M/s Elephanta Oil & Vanaspati Ltd. are pending and there is no certainty that any claim that may be made by the assessee with regard to the amounts receivable from M/s Elephanta Oil & Vanaspati Ltd. would be paid without the liquidator claiming the credit for the amounts receivable from the assessee company. It is well settled that in order to attract the provisions of Section 41(1) of the Act, there should have been an irrevocable cession of liability without any possibility of the same being revived. The assessee company having acknowledged its liability successively over the years would not be in a position to defend any claim that may be made on behalf of the liquidator for credit of the said amount reflected by the assessee as payable to M/s Elephanta Oil & Vanaspati Ltd. 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was found that those sundry creditors were very old and no interest had been paid on those loans, the Division Bench has deleted such addition made under Section 41(1) of the Act. In paragraph 15 the Division Bench has observed and held as under; " 15. In the case before us, it is not been established that the assessee has written off the outstanding liabilities in the books of account. The Appellate Tribunal is justified in taking the view that as assessee had continued to show the admitted amounts as liabilities in its balance sheet the same cannot be treated as assessment of liabilities. Merely because the liabilities are outstanding for last many years, it cannot be inferred that the said liabilities have seized to exist. The Appellate Tribunal has rightly observed that the Assessing Officer shall have to prove that the assessee has obtained the benefits in respect of such trading liabilities by way of remission or cessation thereof which is not the case before us. Merely because the assessee obtained benefit of reduction in the earlier years and balance is carried forward in the subsequent year, it would not prove that the trading liabilities of the assessee have become no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. As such, there is no remission and/or cessation of the liability during the year under consideration subject to the conditions contained in the statute being fulfilled. In the present case, both the aforesaid elements are missing." 9. Thus, applying the ratio laid down in the aforesaid decisions to the facts of the present case, we are of the view that there is no remission or cessation of liability of the sundry creditors appearing in the books of assessee in the impugned assessment year. In view of the aforesaid factual position, we do not consider it necessary to dwell much upon the decisions relied upon by the ld. DR. Thus, in the ultimate analysis, we do not find any infirmity in the order of ld. CIT(A) which is accordingly confirmed. 10. Ground raised in the present appeal is dismissed. 11. In the result, the appeal of the department is dismissed. 9. We have considered rival contentions and carefully gone through the orders of the authorities below as well as order passed by Tribunal in assessee's own case dated 21/06/2017. As the facts and circumstances during the year are same, respectfully following the order of Tribunal in assessee's own case we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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