Section 41

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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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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No cessation of trading liability for mere non-submission of confirmation from creditors

M/s. Flo Dyne Controls (India) Pvt. Ltd. Vs ITO (ITAT Mumbai) - Merely because liability was outstanding, it could not be presumed that the said liabilities had ceased to exist. Since the liability did not cease to exist and the assessee had acknowledged debt in his books, the same could not be taxed under section 41(1)....

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Gain on settlement of sales tax deferred liability not taxable

DCIT Vs Alfa Laval India Ltd. (ITAT Pune) - Alfa Laval India Ltd. case: Difference between the Net Present Value against the future liability credited by the assessee under the capital reserve account in its books of account, is a capital receipt, the addition made on account of the gain on settlement of the sales tax deferred liability not t...

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Tax on Liability of amalgamating company written off by amalgamated company

DCIT Vs. Babcock Borsig Ltd. (ITAT Kolkata) - DCIT Vs. Babcock Borsig Ltd. & Vice-Versa (ITAT Kolkata) Liabilities brought forward from amalgamating company written off by the amalgamated company (assessee) become its Business income- i.e. Profit chargeable to tax under section 41(1) of Income Tax Act, 1961 as the assessee had written off t...

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Deferred tax can neither be taxed U/s. 41(1) nor U/s. 28(4) of Income Tax

CIT Vs. M/S Mcdowell & Co Ltd Now Known As United Spirits Ltd (Karnataka High Court) - CIT Vs. M/S Mcdowell & Co Ltd Now Known As United Spirits Ltd (Karnataka High Court) In the instant case, as per the scheme he was allowed to retain the sales tax as determined by the competent authority and pay the same 15 years thereafter. The tax collected was deemed to have been paid and, [&...

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Waiver of loan for acquiring capital assets not amount to cessation of trading liability

Commissioner Vs Mahindra And Mahindra Ltd. (Supreme Court of India) - Waiver of loan for acquiring capital assets could not be taxed as perquisites under section 28(iv) since receipts were in the nature of cash or money. Section 41(1) of the Income Tax Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record ...

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Recent Posts in "Section 41"

No cessation of trading liability for mere non-submission of confirmation from creditors

M/s. Flo Dyne Controls (India) Pvt. Ltd. Vs ITO (ITAT Mumbai)

Merely because liability was outstanding, it could not be presumed that the said liabilities had ceased to exist. Since the liability did not cease to exist and the assessee had acknowledged debt in his books, the same could not be taxed under section 41(1)....

Read More

Gain on settlement of sales tax deferred liability not taxable

DCIT Vs Alfa Laval India Ltd. (ITAT Pune)

Alfa Laval India Ltd. case: Difference between the Net Present Value against the future liability credited by the assessee under the capital reserve account in its books of account, is a capital receipt, the addition made on account of the gain on settlement of the sales tax deferred liability not taxable...

Read More

Tax on Liability of amalgamating company written off by amalgamated company

DCIT Vs. Babcock Borsig Ltd. (ITAT Kolkata)

DCIT Vs. Babcock Borsig Ltd. & Vice-Versa (ITAT Kolkata) Liabilities brought forward from amalgamating company written off by the amalgamated company (assessee) become its Business income- i.e. Profit chargeable to tax under section 41(1) of Income Tax Act, 1961 as the assessee had written off the liabilities after coming to a conscio...

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Treatment of Cessation of Liabilities – Section 41 – Case Laws

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...

Read More
Posted Under: Income Tax |

Deferred tax can neither be taxed U/s. 41(1) nor U/s. 28(4) of Income Tax

CIT Vs. M/S Mcdowell & Co Ltd Now Known As United Spirits Ltd (Karnataka High Court)

CIT Vs. M/S Mcdowell & Co Ltd Now Known As United Spirits Ltd (Karnataka High Court) In the instant case, as per the scheme he was allowed to retain the sales tax as determined by the competent authority and pay the same 15 years thereafter. The tax collected was deemed to have been paid and, […]...

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Waiver of loan for acquiring capital assets not amount to cessation of trading liability

Commissioner Vs Mahindra And Mahindra Ltd. (Supreme Court of India)

Waiver of loan for acquiring capital assets could not be taxed as perquisites under section 28(iv) since receipts were in the nature of cash or money. Section 41(1) of the Income Tax Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the assessee had not claimed any de...

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No Cessation of liability if Amount forfeited is subject matter of civil suit and cannot be taxed

Bharat Enterprises Vs ACIT (ITAT Mumbai)

Where amount forfeited by assessee against cancellation of booking of flat was subject-matter of civil suit, it could not be said that there was cessation of liability so as to tax such amount as assessee’s income....

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Addition U/s. 41(1) cannot be made for Amount not paid due to long pending dispute

Pyramid Consulting Engineers (P.) Ltd. Vs DCIT (ITAT Mumbai)

Where due to pending disputes with debtors, sales commission could not be paid to agents for longer period, taxation of such liability payable to agents under section 41(1) was not justified....

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Section 41(1) not applies if amount was not claimed in earlier year

Pr. CIT Vs Gujarat State Co-Op. Bank Ltd.(Gujarat High Court)

Section 41(1) of the Act in plain terms provides for adding back of an allowance or deduction which has been made by the assessee in any year in respect of loss expenditure or trading liability and subsequently during any previous year such liability ceases. The primary requirement of applicability of this provision therefore is where an ...

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Section 41(1) cannot be invoked by revenue without showing that such liability had, in fact, ceased to exist

Pr. CIT Vs. Dharmendra Jagdishbhai Dubal (Gujarat High Court)

(1) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in deleting the addition of Rs. 23,04,369 by considering the same to be service tax? (2) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in deleting the addition of Rs. 53,...

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