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TMI Blog1978 (5) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... in the orders of assessment passed earlier by them. During the assessment year in question the liquidator of the assessee which had gone into voluntary liquidation transferred the said sum of Rs. 4,600 which had been shown as the rent payable to the landlord in the earlier years to the profit and loss account of the year in question and treated it as an item of credit in its hands. The Income-tax Officer treated the said sum of Rs. 4,600 also as part of the taxable income on the basis of the profit and loss account presumably on the ground that section 41(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), was applicable. Aggrieved by the order of the Income-tax Officer, the assessee filed an appeal before the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the sum of Rs. 4,600 was to be treated as the assessee's income under the provisions of section 41(1) of the Income-tax Act, 1961 ? " The following facts are not in dispute (i) that several sums amounting to Rs. 4,600 had been treated as expenditure in the earlier orders of assessment passed by the department. (ii) that by the year 1967-68 (the assessment year) the period of limitation for the landlord recovering the said amount had expired ; and (iii) that the sum of Rs. 4,600 had been transferred to the profit and loss account of the company treating it as the amount standing to its credit on the ground that the liability of the assessee to the landlord in that regard had become barred by time. Section 41(1) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y gives up the claim. In the instant case, it is not a case of remission of the liability. The cessation of such liability arises only when it ceases to exist in the eye of law for all intents and purposes. It is argued on behalf of the department that when a debt is barred by time it ceases to exist. It is difficult to agree with the above submission. When a debt becomes barred by time, the creditor would not be able to recover the amount by enforcing his right in court. But the right will not come to an end nor will the liability cease. This is not a case governed by section 27 of the Limitation Act, 1963. In Salmond on Jurisprudence, Twelfth edition, the distinction between a perfect right and an imperfect right is explained as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l thereafter be brought for its recovery. Lapse of time, therefore, does not destroy the right, but merely reduces it from the rank of one which is perfect to that of one which is imperfect. It remains valid for all purposes save that of enforcement. It may be good as a ground of defence, it may suffice to support any security given for it, and it may possess the capacity of becoming a perfect right. Money paid in satisfaction of a statute-barred debt cannot be recovered ; a pledge securing the debt remains valid ; and acknowledgment of the debt by the debtor will revive the creditor's right of action. All these cases of imperfect rights are exceptions to the maxim, Ubi jus ibi idem remedium. The customary union between the right and the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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