Case Law Details
PCIT Vs Adani Agro (P.) Ltd. (Gujarat High Court)
The issue under consideration is whether the addition made by AO under Section 41(1) of the Act on account of cessation of liability is justified in law?
High Court states that, once assessee had continued to show admitted amounts as liabilities in its balance sheet, the same could not be treated as a case of cessation of liabilities merely because liabilities were outstanding for last many years, it could not be inferred that such liabilities had ceased to exist. Therefore, when both the authorities have arrived at finding of fact that the liability was existing in the books of accounts of the assessee from year to year and liability represented the consultancy fee pertaining to the relevant year credited to the account of the consultant. Therefore, the impression of the Assessing Officer that such amount was outstanding for more than three years was erroneous. In fact, fee was granted as expenditure every year and paid in the subsequent year so that at the end of the year there remained a credit balance in respect of that particular year’s consultancy fee which was provided in the books of accounts by the assessee. In view of the above finding of fact, the provisions of Section 41(1) of the Act, 1961 could not have been invoked as there is no remission of cessation of liability. Accordingly, this appeal filed by revenue dismissed.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
This Tax Appeal under Section 260A of the Income Tax Act, 1961 [for short, ‘the Act, 1961’] is at the instance of the Revenue and is directed against the judgement and order passed by the Income Tax Appellate Tribunal, ‘D’ Bench, Ahmedabad dated 28th June 2019 in ITA No.1771/Ahd/2016 for A.Y. 2012-13.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
