TMI Blog1992 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... wrote back unclaimed liabilities and sundry amounts of Rs. 17,595 in its profit and loss account. The assessee pleaded before the Income-tax Officer that the amount written back in the profit and loss account was not taxable in view of the decision in the case of CIT v. Sugauli Sugar Works P. Ltd. [1983] 140 ITR 286 (Cal). The Income-tax Officer did not accept the contention of the assessee and he took the amount written back by the assessee as its income. The assessee, being aggrieved, appealed to the Commissioner of Income-tax (Appeals) who confirmed the action of the Income-tax Officer. The assessee came in appeal before the Tribunal and relied on the decisions in the cases of Sugauli Sugar Works P. Ltd. [1983] 140 ITR 286 (Cal) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed exclusion of this credit for determination of the taxable income on the following grounds: 1. That unilateral writing back of liability to the profit and loss account does not result in cessation of liability. 2. That the limitation only bars the remedy but does not extinguish the liability. Therefore, despite the liability being written back to profit there cannot be any profit in the eye of law. Learned counsel appearing for the assessee relied upon the decisions of this court in CIT v. Sugauli Sugar Worhs P. Ltd. [1983] 140 ITR 286 and CIT v. B. N. Elias and Co. (P.) Ltd. [1986] 160 ITR 45. It was pointed out that, in both the decisions, this court has drawn support from the decision of the Supreme Court in Bombay Dyeing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unspent and unclaimed items of liability. It is profit. Even if the debt does not get extinguished, that carries the only message that the cessation in the context of section 41(1) of the Income-tax Act, 1961, will depend on the intention of the assessee. Where there is complete transparency as to the assessee's intention not to own up the liability, it cannot any more remain open to the assessee to turn around and say that the debt still subsists. The totality of the assessee's conduct shows that the assessee itself has brought about the termination of the liability. The following facts are clear pointers : 1. the writing back of the liability to profits. 2. treating such amount written back as part of profit available for appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conduct of the debtor and the creditor. It need not be a positive act or positive conduct. It can be inferred from the surrounding circumstances that there has been cessation or remission of the liability of the assessee. That was the case of CIT v. Agarpara Co. Ltd. [1986] 158 ITR 78 (Cal). It was a case where bonus remained unclaimed and unpaid and was eventually written back. This court observed as follows (at page 94): " The assessee has provided for bonus for its employees but a part of the bonus so provided for three several years remained unclaimed. Once bonus has been offered by the employer, but remains undrawn, it cannot be said that the liability subsists even after the expiry of the time prescribed by the statute, particu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on bars only the remedy but does not extinguish the debt may not strictly apply in income-tax proceedings in deciding whether there has been cessation or remission of a statutory liability." In our view, there cannot be a strait-jacket formula, irrespective of the facts and circumstances of each case, that unclaimed liabilities should not attract the provision of section 41(1) of the Act simply on the ground that the bar of limitation does not extinguish the debt and as such the assessee can write back such unclaimed debts as money available for use in any manner he may choose with immunity from taxation. As indicated earlier, if the legal remedy for recovery by the creditor is barred, the existence of the debt is merely theoretical where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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