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TMI Blog1979 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... htly held that the assessee in whose hands bad debt had been allowed and the person who had recovered the bad debts subsequently should be e same person so as to invoke the provisions of section 41(4)? 3. Whether, on the facts and in the circumstances of the case, the bad debt recovered by the assessee-partner allowed as a deduction in the hands of the firm cannot be deemed to be the profits chargeable to tax under section 41(4) especially when the same business was continued to be carried on by the partner ? " The assessee is an individual carrying on business in distribution of films. He was a partner in a firm known as Thirumeni Pictures, which was dissolved on 1st July, 1968. Under the dissolution arrangement, he took over the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm and the recovery was by another assessee, who took over the said business ? Section 41 is a special provision made for deeming certain profits as being liable to charge. Section 41(1) provides : " Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently,during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount so allowed, the excess shall be deemed to be profits and gains of business or profession, and accordingly chargeable to income-tax as the income of the previous year in which it is recovered, whether the business or profession in respect of which the deduction has been allowed is in existence in that year or not. " There is an explanation to the said provision, which states that the expression " moneys payable " and the expression " sold " in sub-ss. (2) and (3) of s. 41 shall have the same meanings as in sub-s. (1) of s. 36. Section 36(1)(vii) to which reference is made in the above provision [section 41(4)], provides for the deduction in the computation of income of any debt or part thereof, which is established to have bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile s. 41(1) would perhaps require the identity of the assessee being the same because of the expression " the assessee " used in the said provision, it is absent in s. 41(4). In the absence of such expression in s. 41(4), it would be enough if the identify of the business is established so as to attract tax. This contention appears to us to ignore the closing part of s. 41(4) which provides that the liability under that provision would arise whether the business or profession in respect of which the deduction had been allowed, was in existence in that year or not. Therefore, continued existence of the business is not a condition for applying s. 41(4). If the continued existence of the business is not the criterion, then there could be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to change the concept of liability under the new Act as compared with the earlier Act. It is not also proper to attribute to Parliament, in the absence of clear words to that effect, an intention to tax a person who had not reaped the benefit of the allowance. The intention is to take away the benefit of an allowance already granted. If one did not get that bene. fit, he cannot be required to pay the tax. Realisation of a debt is not income. The provision enacts a fiction and would have to be construed strictly on its language. This is also, in a way, a charging provision and the charge must be clearly made out. It is not made out on the successor. It is thus the identity of the assessee, who enjoyed the benefit of the allowances, that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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