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TMI Blog2017 (3) TMI 1775X X X X Extracts X X X X X X X X Extracts X X X X ..... can be allowed because they have gone for business purpose also and i.e. for studying new designs, new concepts of construction etc. In view of the above we direct the AO to allow the expenses of partners. Matter is remanded back to the file of the AO. This issue of assessee's appeal is partly allowed. - IT APPEAL NO. 1524 (MUM.) OF 2015 - - - Dated:- 15-3-2017 - MAHAVIR SINGH, JUDICIAL MEMBER And AND RAJESH KUMAR, ACCOUNTANT MEMBER Percy J. Pardiwala, AR, for the Appellant M.C. Omi Ningshen, DR, for the Respondent ORDER Mahavir Singh, Judicial Member This appeal by the assessee is arising out of the order of CIT(A)-34, Mumbai, in appeal No. CIT(A)-34/ACIT-19(1)/IT-2/13-14 dated 03-02-2015. The Assessment was framed by Addl. CIT - Range 19(1), Mumbai for the A.Y. 2010-11 vide order dated 26-02-2013passed under section 143(3) of the Income Tax Act, 1961 (hereinafter 'the Act'). 2. The first issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by AO applying the provision of section 41(1) of the Act in respect to outstanding sundry Credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,50,000 Shri Sai Rachna Furniture 5,25,801 Ashok Kothari 2,70,000 According to AO, the amounts are outstanding since long and assessee failed to prove the genuineness of the credit balances. He presumed that these sundry creditors have ceased to exist and accordingly he had a sum of ₹ 31,88,325/- by observing in Para 4.10 as under: - 4.10 In view of the facts and circumstances of our case and the decisions of various courts as cited above, the liabilities shown in the books of accounts against the creditors of ₹ 48,50,875/- which is not claimed for several years and assessee has failed to prove the genuineness of the credit balances have ceased to exist. The assessee has already written off credit balances of ₹ 16,62,350/- in the return of income filed for AY 2011-12. Therefore, the balance liability shown under the head creditors amounting to ₹ 31,88,525/- is brought to tax u/s.41(1) of the I.T. Act in this assessment year. Aggrieved, now assessee preferred the appeal before C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Credited to P L A/c 2010-11 Bal. B/F 48,50,875/- - - 2011-12 -- 1,56,000 16,62,350 2012-13 -- --- -- 2013-14 -- 96,044/- 18,16,481/- 2014-15 -- -- --- 2015-16 -- 2,60,000 5,90,000 2016-17 -- 2,700,000 5,90,000 Total 48,50,875 7,82,044 40,68,831 The learned Counsel for the assessee stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that this provisions has two effects, namely:- ( i ) That although ordinarily the amount of remission or cessation, etc., would not be profits and gains, it has to be regarded as such profits and gains, and ( ii ) Such an amount so forgiven by way of remission or cessation, etc., has to be regarded as profits and gains of business or profession accruing or arising in the previous year wherein it is obtained. In either of these events happened, the deeming provision enacted in the closing part of section 41(1) of the Act comes into play. Accordingly, the amount obtained by the assessee or value of benefit accruing to him is deemed to be the profits and gains of business or profession and it becomes chargeable to tax as the income of that previous year relevant to the assessment year under consideration. In the present case before us, admittedly in the year under consideration i.e. the assessment year 2010-11 by way of remission or cessation no gain has accrued or arisen to the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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