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2021 (3) TMI 1067 - AT - Income TaxCessation of liability u/s. 41(1) - trading liability ceased to exist - HELD THAT:- In the present case, the assessee had received the amount in the course of its business, which are originally treated as an advance. These deposits neither claimed nor returned to the party concerned. There is no dispute that this impugned amount was received in the course of carrying on the normal course of business of the assessee, the amount was written off by the other party, who was given this to the assessee and there was no necessity of fulfilment of contract which was originally entered by the assessee as ILC Industry Limited has written of it. Since the advance was taken in the course of normal business affairs of the assessee and it was unclaimed amount and not required to returned by the assessee will be its trade receipts. Because of the trading operation, the assessee had received it and it become richer by the amount on written of by the ILC Industry Limited in its books of account. Though the amount received originally were not of income nature, the amount remained with the assessee for a long period unclaimed by the third parties, i.e., ILC Industries Limited and become definite trade surplus and to be treated as taxable income. If an amount received in the course of trading transaction, even though it is not taxable in the year of receipt as being the revenue character, the amount changes its character when the amount becomes assessee’s own money because of written of by ILC Industry Limited in its books of account and there was no contractual obligation on the part of the assessee to perform its obligation and it should be treated as income of the assessee. Being so, we are of the opinion that the lower authorities are justified in treating the amount as income of the assessee u/s 41 of the I.T.Act. Where the assessee’s business profit was enhanced on account of addition by invoking the provisions of section 41(1), the assessee is entitled to deduction u/s 10B on the enhanced profit - In the case of Yahoo Software Development (P.) Ltd. [2020 ( 5) TMI 53 - ITAT BANGALORE]disallowance u/s. 40(a)(ia) was made and business income was enhanced, on this count exemption u/s. 10A was granted on the enhanced income. In the case of Anthelio Business Technologies (P.) Ltd. [2017 (1) TMI 257 - ITAT MUMBAI] deduction u/s. 10B was granted on account of enhancement of income due non-deduction of tax at source by invoking the provisions of section 40(a)(i). The assessee received business income through convertible foreign exchange and as such reduced the same by claiming various expenditure without deduction of tax at source. Non-disallowance of expenditure increased business income of assessee in actual terms. In the present case, the assessee received amount from the local party, M/s. ILC Industries Ltd. and the assessee has not received the earnings in convertible foreign exchange. Being so, this cannot be equated with disallowance made u/s. 40(a)(i) or 40(a)(ia) of the Act. Therefore, we reject the alternative ground of the assessee also. Appeal by the assessee is dismissed.
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