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TMI Blog2021 (8) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... 240 Crores from Karnataka Power Transmission Corporation Limited. Thus, adjustment of dues and debts between the parties did not give any advantage to the assessee. On the other hand, the assessee on adjustment of the dues sustained a loss to the extent of ₹ 127.66 Crores. The tribunal therefore, held that provisions of Section 41(1) of the Act are not attracted in the case of the assessee. The aforesaid finding of fact is based on meticulous appreciation of material on record and cannot be termed as perverse. It is pertinent to mention here that the aforesaid finding has not been challenged on the ground that it is perverse It is pertinent to note that Supreme Court in MAHINDRA AND MAHINDRA LTD. [ 2018 (5) TMI 358 - SUPREM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on different accounts as one is on capital account and the other is on trading account and the debt due from the government is a capital account which cannot be set off against the trading liability? (ii) Whether the Tribunal was correct in allowing the assessee's appeal without holding that the cessation of liability by M/s. KPCL was a deemed revenue receipt which cannot be set off against the capital receipt from the government of Karnataka needs to be upheld? (iii) Whether the Tribunal is correct in allowing the appeal filed by the assessee without appreciating the order passed by the appellate Commissioner who upheld the invoking of provisions u/s.41(1) of the Act which is a deeming provision in respect of the transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer by an order dated 18.03.2013 invoked provisions of Section 41(1) of the Act and treated as sum of ₹ 240 Crores as income of the assessee and the same was brought to tax. The assessee thereupon filed an appeal. The Commissioner of Income Tax (Appeals) by an order dated 22.07.2013 dismissed the appeal. The assessee thereupon filed an appeal before the tribunal. The tribunal by an order dated 31.10.2014 inter alia held that no benefit has been accrued to the as. And therefore, the provisions of Section 41(1) of the Act are not attracted to the fact situation of the case. In the result, the appeal preferred by the assessee was allowed. In the aforesaid factual background, this appeal has been filed. 4. Learned co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee submitted that tribunal on the basis of material available on record has recorded a finding that provisions of Section 41(1) of the Act is not applicable to the case of the assessee as no real or notional benefit has been obtained by the assessee. It is also argued that in order to attract the applicability of Section 41(1) of the Act the assessee has to receive benefit in respect of trading liability by way of cessation / remission. The assessee in the instant case has not received any benefit and therefore, the tribunal has rightly held that the provisions of Section 41(1) of the Act are not applicable to the facts of the case. It is also submitted that the aforesaid finding is a finding of fact, which has not been shown to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; 7. The conditions precedent for invocation of Section 41(1) of the Act can be summarized as follows: (i) an allowance or deduction has been made in respect of the trading liability incurred by the assessee in the course of assessment for previous year. (ii) Subsequently a benefit has been obtained in such trading liability by way of remission / cessation thereof. (iii) In such a case, value of benefit accruing to the assessee is deemed to be the profits and gains of business which otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as revenue in nature, the corresponding loss should also be given the same treatment. There cannot be two yardsticks to measure two parts of the same transactions. In addition to the amount received from the Government, there was also remission of the assessee's liability to KPCL totaling to ₹ 240 Crores - by way of payment by Government as well as balance being written off by the creditor as per the instructions of the Government. Even this amount to be reimbursed by the Government, the amounts actually reimbursed (directly or indirectly) is not considered as revenue. On the other hand, the portion not reimbursed is sought to be treated as a revenue loss. This is not acceptable. 9. It is pertinent to note that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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