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2016 (7) TMI 400 - HC - Income TaxAddition on account of cessation of liability - Advance receipts from client - system of accounting - the deposits received by the assessee were treated by him as his liability - Held that:- There is no iota of doubt that the deposits were treated by the assessee as a capital receipt and the deposits were adjusted in the subsequent years against the expenditure incurred for or on behalf of the client from whom the deposit was received. Such expenditure also included the fees of the assessee himself. It is at that stage that the money was earned by him. Before that, he was holding the money as an agent or as a fiduciary of his client. There was no “cessation of trading liability” within the meaning of section 10(2A) (erstwhile), and the amount of such wages could not be added to income. Thus, even though the remedy of some of the clients may have become barred by limitation, even then the barred debt did not become income of the assessee and could not be taxed under the Income-tax Act. See KOHINOOR MILLS CO. LTD. Versus COMMISSIONER OF INCOME-TAX, BOMBAY CITY I. [1962 (10) TMI 58 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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