9911796707
TMI Blog1993 (1) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... alance of Rs. 6,093 in the accounts of casual contributors and part-time correspondents. It represented the remuneration awarded by the assessee to casual contributors and part-time correspondents who did not collect the amounts awarded to them for one reason or the other. During the previous year under consideration, the assessee transferred this amount to its profit and loss account. The Income-tax Officer treated this amount as the income of the assessee. Aggrieved by the action of the Income-tax Officer, the assessee went in appeal before the Appellate Assistant Commissioner. The contention of the assessee before the Appellate Assistant Commissioner was that transfer of this amount to the profit and loss account did not mean that it represented its income of the year under consideration. The Appellate Assistant Commissioner accepted this contention of the assessee and excluded the amount of Rs. 6,093 from its income. Against the order of the Appellate Assistant Commissioner, the Revenue went in appeal to the Income-tax Appellate Tribunal (for short "the Tribunal"). The Tribunal upheld the finding of the Appellate Assistant Commissioner and held that the aforesaid amount did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ains of business and charged to income-tax as income of that previous year. In the instant case, there is no dispute about the fulfilment of the first condition, i.e., deduction had been made in the assessment for earlier years in respect of the amount under consideration by way of expenditure. The controversy raised is in regard to cessation of liability in respect thereof. According to the Revenue, once the claim is barred by limitation and the amount is transferred by the assessee himself to the profit and loss account, " cessation of liability" is complete. According to the assessee, that by itself is not enough. The transfer of the amount standing in the balance-sheet as trading liability to the profit and loss account, by itself, cannot amount to cessation of liability-it must be a bilateral act, which means that there must be consent, implied or express, of the creditor in order to hold that there is cessation of liability. We have carefully considered the rival submissions. On a careful perusal of section 41(1) of the Act, we find it difficult to accept the contention of the assessee that cessation of liability can take place only as result of a bilateral act. In our op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the light of these observations, it was held that the trading liability incurred by the assessee in respect of the said amount did not cease to be a trading liability in the year in question by reason of the expiry of period of three years. It may be noted here that the amount involved in the above case represented the amount of wages which had become due to the labourers and workmen but which were not claimed by them. The court found that though the period of three years which was the period for filing a suit had expired, the liability under the concerned labour legislation had not ceased. It was in that view of the matter that it was held that there was no cessation of liability. Besides, in the above case, on facts also, there was no transfer of the amount in question by the assessee to its profit and loss account as has been done in the instant case. Next in order is the decision of this court in J. K Chemicals Ltd. v. CIT [1966] 62 ITR 34. In this case, certain amounts were allowed as deduction in the past in respect of wages, salary and bonus payable to the employees. A certain portion of the wages, salary and bonus so debited was in fact not drawn by the employees. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at in view of the fact that despite the expiry of the period of limitation to enforce it, the assessee could not get rid of his liability when called upon to meet it either by the employees under the Industrial Disputes Act or by the Government under the Bombay Labour Welfare Fund Act on account of the special provisions of those Acts. It was in that view of the matter that this court held that a unilateral act on the part of the debtor cannot bring about a cessation of liability and decided in favour of the assessee. It may be observed that both the above decisions were rendered in cases where in effect the liability did not cease to exist by operation of law. It still remained enforceable against the assessee by virtue of the relevant labour legislations. The decision in J. K Chemicals Ltd.'s case [1966] 62 ITR 34 (Bom) was followed by this court in CIT v. Sadabhakti Prakashan Printing Press (P.) Ltd. [1980] 125 ITR 326. It was also followed by the Calcutta High Court in CIT v. Sugauli Sugar Works P. Ltd. [1983] 140 ITR 286 and again by this court in CIT v. Chase Bright Steel Ltd. (No. 2) [1989] 177 ITR 128. From a careful perusal of the above decisions it is clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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