9911796707
TMI Blog2019 (5) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... s are kept for a longer period or due to climatically change over a period in years, these items become waste and had no value at all. But, in the present case, the assesseecompany has shown its value in the closing stock. The items which are not perishable is nature like Inter Lining such as Bukram, Drill Cloth, Synthetic Lining - Bylon Thread such as N.W.P. Tape, Velcrow Tape, Cotton Tape, Metallic Fitting such as - Eyelets, Hook, Buckle, Washer, D. Ring etc., the assessee-company has shown the value of these items at NIL. It is also not in dispute that the assessee has been following the method of valuing the closing stock at cost or market value, whichever is less. During the year under consideration, no new purchases have been made. The assessee is in the business of leather, leather shoes, leather shoe-uppers etc., in respect of which the assessee had a closing stock of raw material and finished goods as stated above. It is also not in dispute that the assessee has been keeping the stock of these items since last so many years. The assessee has furnished the details of working of opening as well as closing stock. But no cogent reasons have been given in respect of the stocks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e complete inventory. The assessee sold the part of the stock to two parties viz., M/s. Deepak Impex, Agra and M/s. Siddhartha Exports, Noida. The Ld. D.R. submitted that since the assessee is valuing the closing stock at cost or market value whichever is lower year after year, then how the goods were sold @ 10% to 30% of the value of the goods shown as opening stock. It was observed that one of the purchaser of the goods M/s. Deepak Impex, Agra have partners Shri Pradip Wasan and Shri Jatinder Wasan who are also the Directors of the assessee-company. No specific details have been given with regard to valuation of the closing stock in respect of the bills raised to other purchaser i.e., M/s. Siddhartha Exports, Noida. The same do not contain full details. The Ld. D.R. submitted that Ld. CIT(A) has failed to appreciate that assessee was reducing the value of the stock year after year, therefore, addition was wrongly deleted by the Ld. CIT(A). 5. On the other hand, Learned Counsel for the Assessee submitted that similar issue have been decided by ITAT, Delhi Bench in the case of the same assessee for the assessment year 2005-2006 dated 20th August, 2010, copy of the Order is placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue. Thus, the assessee was justified in selling the goods at a lower value year after year. When similar method of accounting have been employed by assessee in earlier year and similar addition have been deleted by the Tribunal in assessment year 2005-2006, there was nothing wrong in the findings of the Ld. CIT(A) to have deleted similar addition. In the absence of any material on record in favour of the Revenue, no interference is called for in the matter. The Revenue in the ground of appeal also stated that in assessment year 2005-2006, Revenue has not filed any appeal before the jurisdictional High Court because of the CBDT Circular. It, therefore, stands proved that finding of fact in the impugned year have reached finality. In the absence of any contrary material on record, no interference is called for. The Departmental Appeal, therefore, stands dismissed. 7. In the result, appeal of the Department dismissed. ITA.No.1630/Del./2012 (Assessee's Appeal) : 8. Ground No.1 in assessee's appeal is general in nature and therefore, needs no adjudication. Learned Counsel for the Assessee did not press Ground No.2, on which, assessee agitated addition of Rs. 6,91,274/- on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer relied upon several decisions in support of the contention and ultimately assessed the aforesaid sum under section 41(1) and 28(iv) of the Income-Tax Act, 1961 and added the same under section 41(1) of the Income-Tax Act, 1961 as cessation of liability or no more liability remains in existence. 11. The addition was challenged before the Ld. CIT(A), on which, remand report of the assessing officer was called for. The assessee in the rejoinder also contended that Section 41(1) is not applicable in the present case because it deals only with the trading liability. If it was the intention of the Legislature to cover for all liability, then, it would not have been mentioned 'Trading Liability'. In otherwords, in order to cover all liabilities under section 41(1), the Legislature would have mentioned the word "Liability" only. The assessing officer has relied upon Judgment in the case of Kesari Tea Company Ltd., (supra), which deals with the issue of reversal of purchase tax liability, under which, company sum reversed the liability and without approval of the concerned Revenue Department. However, in the case of the assessee company, it has taken loan from Banker wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... successor may exercise their "Right of Waiver" unilaterally to absolve the debtor from his liability to repay. After such exercise, the debtor is deemed to be absolved from the liability of repayment of loan subject to the conditions of waiver. The waiver may be a partly waiver i.e., waiver of part of the principal or interest repayable, or a complete waiver of both the loan as well as interest amounts. Hence, waiver of loan by the creditor results in the debtor having extra cash in his hand. It is receipt in the hands of the debtor/assessee. The short but cogent issue in the instant case arises whether waiver of loan by the creditor is taxable as a perquisite under Section 28 (iv) of the IT Act or taxable as a remission of liability under Section 41 (1) of the IT Act. 12. The first issue is the applicability of Section 28 (iv) of the IT Act in the present case. Before moving further, we deem it apposite to reproduce the relevant provision herein below :- "28. Profits and gains of business or profession.- The following income shall be chargeable to income-tax under the head "Profits and gains of business profession",- x x x (iv) the value of any benefit or perquisite, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or waives any such liability, then the assessee is liable to pay tax under Section 41 of the IT Act. The objective behind this Section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability. It is undisputed fact that the Respondent had been paying interest at 6 % per annum to the KJC as per the contract but the assessee never claimed deduction for payment of interest under Section 36 (1) (iii) of the IT Act. In the case at hand, learned CIT (A) relied upon Section 41 (1) of the IT Act and held that the Respondent had received amortization benefit. Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time, hence, it is nothing else than depreciation. Depreciation is a reduction in the value of an asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the Respondent in previous assessment years was due to the deprecation of the machine and not on the interest paid by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) Overdraft Facility, which is connected with the day-to-day business activity of the assessee. Interest is, therefore, related to the business activity and is a trading liability of the assessee. the Ld. D.R. relied upon Judgment of the Hon'ble Delhi High Court in the case of Logitronics P. Ltd., vs. CIT (2011) 333 ITR 386 (Del.) in which it was held that "waiver of loan taken by assessee for business activity is assessable as business income under section 41(1) of the Income Tax Act, 1961 and that when no deduction claimed in respect of loan, it is not income of assessee". The Ld. D.R, therefore, submitted that in view of the above it is seen that nature of liability which ceases to exist was a trading liability, therefore, Orders of the authorities below may be confirmed. 14. We have considered the rival submission and perused the material available on record. Section 41(1) of the Income Tax Act, 1961 provides "where an allowance or deduction has been made in the assessment for any year in respect of loss expenditure or trading liability incurred by assessee and subsequently during any previous year (-) the (a) The first mentioned person has obtained, whether in cash or in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
