2010 (1) TMI 8

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..... debenture from debit and credit side of balance sheet – AO made the addition of 50 Lac – held that - writing off the said amount would not attract provisions of Section 41(1) of the said Act - Both the amounts on debit and credit side have been written back/ off resulting in no benefit to the assessee. The assessee had not become richer by any amount – Addition can not be made – Order of ITAT was correct
MR. BADAR DURREZ AHMED and MR. SIDDHARTH MRIDUL, JJ. For the Appellant : Mr Subhash Bansal For the Respondent : None BADAR DURREZ AHMED, J (ORAL) CM 198/2010 The delay in re-filing the appeal is condoned. This application stands disposed of. ITA 14/2010 The revenue is aggrieved by the Income Tax Appellate Tribunal's order dated .....

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..... ever received any interest from Enterprises and even the prospect of recovery of the maturity value of the debentures became uncertain. In this context, the Board of Directors of the assessee company considered the question of writing off the said amount of Rs 50 lacs and it was decided that the said amount be written off both in the debit and credit side of the balance sheet. The assessee's stand throughout has been that the said writing off had no effect on the Profit & Loss Account. 3. The Assessing Officer, however, did not agree with the explanation given by the assessee and made the addition of Rs 50 lacs, invoking the provisions of Section 41(1) of the said Act. The Commissioner of Income Tax (Appeals) decided in favour of the asses .....

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..... also noted by the Tribunal that it was an undisputed fact that the amount of Rs 50 lacs written off was not allowed as deduction nor does it represent trading liability which had gone to the computation of income for earlier years. Therefore, writing off the said amount would not attract provisions of Section 41(1) of the said Act. After referring to several decisions of the Supreme Court and other High Courts, the Tribunal concluded as under:- "10. From the judicial pronouncements discussed above it is clear that provisions of section 41(1) can be pressed into operation only in the cases where any expenditure or loss has been allowed in any of the assessment year and assessee derives any benefit in the relevant assessment year or assessee .....

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