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TMI Blog1981 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... med the view taken by the ITO. The assessee came in further appeal to the Tribunal and contended that factually the amount included was not correct because the assessee paid back the liabilities with regard to unsecured loans of Rs. 36,000, commission on sugar sales amounting to Rs. 37,895 and interest on unsecured loans to the extent of Rs. 4,142 and that the amount of Rs. 15,000 was paid off with reference to Amina Khatoon on 22nd February, 1951, the amount of Rs. 10,000 with regard to Iqbal Ahmad on 16th January, 1964, and the amount of Rs. 5,000 with reference to Begum Barunnessa on 17th January, 1964. The assessee, however, did not give the date with reference to the loan paid off with regard to Dureswar. The Tribunal, having regard to the contentions of both parties, was of opinion that the liabilities for expenses arose for 1948-49 and these amounts became barred by limitation. With reference to certain decisions, to which we would make reference later on, the Tribunal was of the view that the amounts could not be brought to tax because s. 41 stipulates that as regards the trading liabilities, it is only upon remission or cessation that s. 41(1) of the Act applies. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned advocate for the Revenue, points out that the board of directors in their meeting held on 6th January, 1964, resolved that the non-payable credits be written off by 30th June, 1964, and by virtue of such resolution the credit balances in the suspense account were transferred to the capital reserve account and, therefrom, to the profit and logs appropriation account on 30th June, 1964. According to him, this amount was treated by the assessee as its income which again was to be distributed as dividend and that would attract the provisions of s. 41(1) of the Act. By its conduct, the assessee had treated its liability to have ceased to exist. Mr. Mitra then contends that according to the Oxford Dictionary " cessation " means ceasing, discontinuance or stoppage, and the provision of this section will apply to the benefits obtained by cessation of liability which had once been allowed or deducted. Reliance was placed in this connection on the decision of the Allahabad High Court in the case of Indian Motor Transport Co. v. CIT [1978] 114 ITR 677. In this case, the assessee carried on business in road transport. On 31st March, 1970, it transferred a sum of Rs. 24,869 to its profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This necessarily implied that the assessee had treated its liability to have ceased to exist at least on March 31, 1970. The Tribunal was justified in holding that the amounts in question were liable to be assessed under s. 41 (1) of the Act. On behalf of the Revenue reference is also made to another decision of the Allahabad High Court in the case of Pioneer Consolidated Co. of India Ltd. v. CIT [1972] 85 ITR 410. It is held therein that money due by the assessee-company to its constituents, not claimed by them, and transferred to the profit and loss account of the company, was income of the assessee in the accounting year in which it was so transferred. Mr. Mitra thus stresses much emphasis on the conduct of the assessee which treated the amount in question as its income because it was sure that the claimants were not likely to come forward to make demands of the barred debt. Mr. D. K. Dey, the learned advocate for the assessee, argues that when a liability becomes barred by the law of limitation, there is neither remission nor a cessation of the liability, the liability is not extinguished, and only the creditor's remedy becomes barred. Therefore, if the amount of a tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is not one of them. On the basis of the decision referred to above it is contended by Mr. De that when a liability becomes barred by the law of limitation, there is neither remission nor cessation of the liability, the liability is not extinguished, only the creditor's remedy becomes barred. 'In support of such contention reference is made to the decision of the Bombay High Court in the case of J. K. Chemicals Lid. v. CIT [1966] 62 ITR 34. He draws our special attention to p. 41 of the report wherein the Chief Justice, Tambe, discusses the principles for the purpose of attracting the provisions of s. 10(2A) of the Indian I.T. Act, 1922, which corresponds to s. 41(1) of the present Act. It would be of some advantage to quote the passage (p. 41 of 62 ITR: " The transfer of an entry is a unilateral act of the assessee, who is debtor to its employees. We fail to see how a debtor, by his own unilateral act, can bring about the cessation or remission of his liability. Remission has to be granted by the creditor. It is not in 'dispute, and it indeed cannot be disputed, that it is not a case of remission of liability. Similarly, a unilateral act on the part of the debtor cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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