Case Law Details
Nandini V. Kalgutkar Vs ITO (ITAT Bangalore)
On perusal of section 41 of the IT Act, it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax u/s. 4 1(1) of the IT Act. The objective behind this section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability.
In the present case, there is no allegation that assessee has claimed this amount as deduction in any assessment year. If it is being so, only on account of difference between the balance shown in assessee’s books of accounts and in the books of accounts of M/s. Meghamani Organics cannot lead to conclusion that assessee has derived any benefit in terms of section 41(1) of the IT Act. Further, the said balance is also shown as outstanding in the Balance Sheet of assessee as on 31.03.2008 and showing liability in the Balance Sheet tantamount to acknowledgement of debt and that the liability has neither ceased to exist nor there is a remission of liability in terms of section 41(1) of the IT Act as held by Hon’ble Delhi High Court in case of CIT vs. Shri Vardhman Overseas Ltd. reported in 343 ITR 408 and DCIT vs. Karnataka Agro Industries Corporation Ltd. reported in 63 CCH 002 [Bang Trib].
In view of this, we are of the opinion that the difference between the balance shown in the accounts of the assessee and balance shown in the accounts of M/s. Meghamani Organics cannot be treated as cessation of liability in terms of section 41(1) of the IT Accordingly this addition of Rs.63,91,760/- is deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
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