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2019 (6) TMI 1481 - AT - Income TaxCessation of liability under section 41(1) - assessee company had failed to prove that the loan obtained from M/s Matrix Logistics Pvt Ltd was or the purpose of acquiring capital assets” - HELD THAT:- Whether the credit is routed through the profit and loss account or not is wholly irrelevant for determining the nature of receipt. As held by Hon’ble Supreme Court’s landmark judgment in the case of Kedarnath Jute Mfg Co Ltd Vs CIT [1971 (8) TMI 10 - SUPREME COURT] the accounting entries cannot be determinative of the nature of receipt. In any case, what can be added to income under section 41(1) is something in respect of which deduction has been allowed in past. It is an essential prerequisite for invoking section 41(1) that “an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee” and it is only when the assessee derives any benefit in respect of waiver of such liability that the provisions of Section 41(1) can be invoked. Unless, therefore, it is shown that the assessee has been allowed any deduction in past, section 41(1) cannot be invoked. Similarly, as regards the taxability under section 28(iv) it can only come into play only in case of benefits other than the receipt of cash or money. On both the counts, the case of the Revenue fails Respectfully following the esteemed views of Hon’ble Supreme Court in the case of Mahindra and Mahindra Ltd [2018 (5) TMI 358 - SUPREME COURT] we approve the line of reasoning adopted by the CIT(A). The Assessing Officer was clearly in error in invoking the provisions of Section 41(1) on the facts of this case, and the CIT(A) was perfectly justified in reversing the stand of the Assessing Officer.
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