9911796707
TMI Blog1982 (3) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... of the goods had entered into the determination of net commercial results as per profit and loss account and as such was claimed and was allowed by the ITO in computing the total income/loss of the assessee for the assessment year 1976-77 as per order dated 23-1-1979 made by the ITO, which determined the figure of loss of Rs. 5,29,332 before allowance of depreciation for that year. 4. During the course of the assessment proceedings for the assessment year 1977-78, which is under appeal before us, the ITO found that the said 52 creditors to whom the assessee owed Rs. 11,61,768.06 as on 1-8-1975 were paid off by the assessee only to the extent of 50 per cent, of the amount due to each one of them. This 50 per cent came to Rs. 5,80,884. The balance 50 per cent of the amount was remitted by each creditor in favour of the assessee during the accounting period relevant to this assessment year, i.e., the assessment year 1977-78. The details of the opening balance, the amount paid in cash by the assessee and the amount remitted by the parties with their respective names appears in Annexure A to the assessment order dated 26-9-1980 for the year under appeal. After giving an opportunity to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors, amounting to Rs. 5,80,884, cannot be assessed as income under section 41(1) to the extent of Rs. 5,29,332 not allowed as deduction in the assessment year 1976-77. " The revenue in its appeal is aggrieved with the directions of the learned Commissioner to the ITO to allow section 80G relief with regard to the donations of Rs. 14,000. 9. We have heard the parties. We first would like to dispose of the appeal of the revenue which contains only a single ground pertaining to the directions by the Commissioner (Appeals) that relief under section 80G in respect of the donation of Rs. 14,000 given to Chajju Ram Memorial Jat College be allowed. We find that there is a finding of fact given by the learned Commissioner that the said college 'is affiliated to Kurukshetra University and accounts of the college are audited by the chartered accountants of the University and DPI Auditors'. The Commissioner also found that the income of the college was exempt under the provisions of section 10(22) and as such the assessee was entitled to relief in respect of donations of Rs. 14,000 made to the said college. These facts have not been controverted and in our opinion, on these facts, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in this judgment has dissented from the judgment of the Allahabad High Court in the case of K. T. Wire Products v. Union of India [ 1973] 92 ITR 459, the Gujarat High Court judgment in the case of CIT v. Garden Silk Wvg. Factory [1975] 101 ITR 658 and the Delhi High Court judgment in the case of Raj Narain Agarwala. The revenue cited the case of Choudhary Cotton Ginning Pressing Factory v. CIT [1977] 109 ITR 6 (Punj. Har.) in its support and to support the order of the Commissioner (Appeals). 12. We are of the opinion that the unabsorbed depreciation of the assessee, which is a registered firm, of the assessment year 1976-77 amounting to Rs. 20,392 allocated to the partners, not wholly set off in their respective assessments, should be brought back for computation of the total income of the firm for the year under appeal, i.e., 1977-78. In any case, from what is stated above, it is also clear that on the issue that is before us about the treatment to be given to the unabsorbed depreciation amounting to Rs. 20,392, there are two reasonable views possible as there is conflict of judicial opinion on the issue. It is now trite law that in such a situation in the interpretation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. On the basis of the above judgments, it was further emphasised that under section 41, there is a fiction that any benefit accruing to an assessee by remission or cessation of its trading liability is deemed to be the profits and gains of Its business but it comes into play only if while computing its income for some assessment year, an allowance or deduction in respect of the trading liability is actually made and subsequently, the assessee received in respect of that trading liability, some benefit whether in cash or in some other manner which accrues to the assessee because of its ceasing to exist. It was emphasised time and again that the assessee had not received any benefit because of determination of loss in the assessment year 1976-77, and as such during the accounting period relevant to the assessment year under appeal, i.e., 1977-78, when the amounts by the 52 creditors totalling Rs. 5,80,884 were remitted, these were not hit by the provisions of section 41(1). 15. The revenue, through Shri R.S. Khichi, the junior authorised representative, strongly opposed these submissions. It was contended by Shri Khichi that the learned counsel for the assessee has been making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITO valid jurisdiction and powers to assess the amount in question under section 41(1). 16. We have given careful considerations to the rival submissions and we are of the opinion that this ground of the assessee has to be rejected. The reasons for this are not too far to seek. It is admitted that the trading liability of Rs. 11,61,768.06 by way of purchases made by the assessee in the accounting period relevant to the assessment year 1976-77 had gone into the determination of the final commercial results for that year in the form of trading and profit and loss account. The purchases are admittedly a trading liability of the assessee. This liability was of the sum of Rs. 11,61,768.06 as purchases made from 52 creditors, whose names and addresses appear in Annexure A to the impugned assessment order made by the ITO. It is also admitted by the assessee and there is no dispute before us on this question that those parties have remitted 50 per cent of the amount and each of them having received 50 per cent of the amount has absolved the assessee from all legal liability regarding the payment of the balance 50 per cent of their respective amounts. In other words, the liability whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,768.06 on purchases account and reducing what could otherwise constitute profit. Now, if while arriving at a particular figure, after availing of this benefit, there results a negative figure, that by itself cannot take away the benefit that the assessee had actually received. Therefore, when the assessee's learned counsel says that the assessee actually did not receive any benefit, it is a spacious but fallacious argument which has to be rejected. 18. His contention that allowance or deduction with regard to the expenditure, loss or trading liability has to be against a positive income in the process of assessment, is certainly importing into section 41(1) something which does not exist. The section has to be interpreted as it is. There is no scope for intendment and in this regard, the contention of the revenue that there was an attempt to introduce into the interpretation of section 41(1), an exterior element cannot be called unwarranted. 19. The learned counsel for the assessee cited various authorities, noted supra, and after perusal of each one of them carefully, we do not find that he can draw any support for the proposition that he has propounded and which we have dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
