Section 41

Analysis of Section 41(1) of Income Tax Act, 1961

Income Tax - In business there are circumstances where a person might have incurred a liability but later on he need not have to pay it for one or other reason. The Income Tax Act brings to tax such liabilities which are no more payable. ...

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Can AO invoke section 41(1) merely because liability is long outstanding

Income Tax - Can A.O. could invoke section 41(1) on the pretext that liability has been long outstanding and the assessee is willingly not writing off the debts from its books? Section 41(1) is not applicable when the long outstanding liabilities have not been written off from books of accounts and continue to be reflected in the Balance […]...

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Treatment of Cessation of Liabilities – Section 41 – Case Laws

Income Tax - Section 41(1) provides for taxing any amount benefit which was obtained by a person with respect to any loss, expenditure or trading liability incurred in any earlier Assessment Years. The Section is re-produced as under...

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Making Chargeable to Tax U/s. 41(1) of Allowance/Deduction Already Made

Income Tax - The Supreme Court in CCIT vs. Kesaria Tea Co. Ltd. (2002) 20 SITC 172 (SC) has laid down that the resort to section 41(1) can be taken only if the liability of the assessee can be said to have ceased finally and there is no possibility or reviving it. Also, it has held that an unilateral action on the part of the assessee by way of writin...

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Section 41(1) cannot be applied to bogus & non-existent liability

Green Star Corporation Vs ACIT (ITAT Kolkata) - No addition can be made to the income of the assessee in this asst. years, as in the view of the AO the outstanding liability in question is bogus and non-existent. The question of cessation of such non-existent as bogus liability does not arise. Hence, Sec. 41(1) cannot be applied. Only when there...

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Section 41(1) not applicable to Advance for bookings not claimed as allowance or deduction

ACIT Vs Sunderdeep Construction Pvt. Ltd (ITAT Indore) - ACIT Vs Sunderdeep Construction Pvt. Ltd (ITAT Indore) On perusal of the finding of Ld. CIT(A) as well as the facts narrated before us along with the documentary evidences it is predominantly clear that the alleged amount of bogus creditors are not in the form of sundry creditors. These amounts are ...

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Non refundable amount received in the course of Business can be treated as Income

Hothur Traders Vs ACIT (ITAT Bangalore) - Hothur Traders Vs ACIT (ITAT Bangalore) In the present case, the assessee had received the amount in the course of its business, which are originally treated as an advance. These deposits neither claimed nor returned to the party concerned. There is no dispute that this impugned amount was received ...

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Section 41(1) addition cannot be made merely for non-confirmation by creditors

Krishnaping Alloys Ltd vs ACIT (ITAT Mumbai) - Non-appearance or non-response of creditors could not be sole ground to draw an adverse inference against assessee, when assessee had filed necessary evidence to prove that liability was genuine in nature, which was subsequently paid back by converting said liability into share application money....

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Section 41(1) No Addition without evidence of cessation of trading liability

Nama Properties Ltd. Vs DCIT (ITAT Hyderabad) - Nama Properties Ltd. Vs DCIT (ITAT Hyderabad) In the decisions relied upon by the learned Counsel for the assessee it was held that the genuineness of the trade payables or creditors has to be examined in the year in which they originate and that unless the liability becomes unenforceable or is writ...

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Recent Posts in "Section 41"

Section 41(1) cannot be applied to bogus & non-existent liability

Green Star Corporation Vs ACIT (ITAT Kolkata)

No addition can be made to the income of the assessee in this asst. years, as in the view of the AO the outstanding liability in question is bogus and non-existent. The question of cessation of such non-existent as bogus liability does not arise. Hence, Sec. 41(1) cannot be applied. Only when there is a genuine liability and there is ces...

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Section 41(1) not applicable to Advance for bookings not claimed as allowance or deduction

ACIT Vs Sunderdeep Construction Pvt. Ltd (ITAT Indore)

ACIT Vs Sunderdeep Construction Pvt. Ltd (ITAT Indore) On perusal of the finding of Ld. CIT(A) as well as the facts narrated before us along with the documentary evidences it is predominantly clear that the alleged amount of bogus creditors are not in the form of sundry creditors. These amounts are advances against booking of […]...

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Non refundable amount received in the course of Business can be treated as Income

Hothur Traders Vs ACIT (ITAT Bangalore)

Hothur Traders Vs ACIT (ITAT Bangalore) In the present case, the assessee had received the amount in the course of its business, which are originally treated as an advance. These deposits neither claimed nor returned to the party concerned. There is no dispute that this impugned amount was received in the course of carrying on […]...

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Section 41(1) addition cannot be made merely for non-confirmation by creditors

Krishnaping Alloys Ltd vs ACIT (ITAT Mumbai)

Non-appearance or non-response of creditors could not be sole ground to draw an adverse inference against assessee, when assessee had filed necessary evidence to prove that liability was genuine in nature, which was subsequently paid back by converting said liability into share application money....

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Section 41(1) No Addition without evidence of cessation of trading liability

Nama Properties Ltd. Vs DCIT (ITAT Hyderabad)

Nama Properties Ltd. Vs DCIT (ITAT Hyderabad) In the decisions relied upon by the learned Counsel for the assessee it was held that the genuineness of the trade payables or creditors has to be examined in the year in which they originate and that unless the liability becomes unenforceable or is written off by the […]...

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Section 41(1) Not Applicable to Loan Waiver related to Capital Asset Purchase

DCIT Vs Rama Phosphates Ltd (ITAT Mumbai)

The issue under consideration is whether Section 41(1) is applicable in case of waiver of liability incurred in respect of purchase of capital asset?...

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Waiver of Working Capital Loan Taxable u/s 28(iv) and not u/s 41(1)

ITO Vs M/s Sri Vasavi Polymers P. Ltd. (ITAT Visakhapatnam)

The issue under consideration is whether CIT(A) is correct in deleting the addition made by AO u/s 41(1) for waiver of working capital loan and charge it u/s 28 of the Act?...

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Know-how under development is self-generated asset & hence no Capital Gain Tax

Bharat Serums And Vaccines Ltd. Vs ACIT (ITAT Mumbai)

Whether the CIT(A) is correct in holding that consideration received on assignment of know-how is chargeable to tax as Capital Gains?...

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Long outstanding liability cannot be treated as ceased liability & added back u/s 41(1)

HPL Additive Ltd Vs DCIT (ITAT Delhi)

HPL Additive Ltd Vs DCIT (ITAT Delhi) The issue under consideration is whether the addition made by A.O. u/s 41(1) treating the outstanding as cessation of liability is justified in law? During the course of scrutiny assessment proceedings, assessee was asked to furnish complete details of sundry creditors. After perusing the details, AO ...

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No addition under section 41 on waiver of loan by Government

Pr.CIT Vs SICOM Ltd (Bombay High Court)

As per section 41(1), there should be an allowance or deduction claimed by the assessee in any assessment for any year 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 unde...

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