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2013 (7) TMI 612 - AT - Income TaxCessation of liability u/s. 41(1) of the I.T. Act - Assessee is a partnership firm of family member of a Hindu Undivided Family and there were changes in the constitution of the partnership firm when few partner retired from the firm - Owing to some disputes amongst the family members of various branches of the group, the settlement of the accounts of the retiring partners could not be made and the same remained outstanding in the balance sheet year after year. However, in order to present the rosy pictures about the financial health of the partnership firm, during the year under consideration the brought forward outstanding balances of the old partners were transferred to the existing partners' account in order to show the sufficiency of the capital invested by the existing partners so that the loan facility from the banks etc., could be availed - The transfer of amount from the account of old partners and loan account to the existing partners account amounts to cessation of liability. Held that:- By no stretch of imagination, it can be said that there has been cessation of liability as held in the case of C.I.T. vs. Auto Kashyap India Pvt. Ltd. [2010 (4) TMI 53 - DELHI HIGH COURT] - The transfer of amount from one account to another which ultimately remained with the firm is not a cessation of liability - The existing partners were personally liable to the old partners as well as to the creditors – Decided against the Revenue.
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