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2022 (9) TMI 717 - Income Tax
Addition on account of cessation of liability u/s 41 - HELD THAT:- For the application of section 41(1) it is necessary that the assessee must have obtained some benefit in respect of such trading liability by way of remission or cessation thereof. As per provision of section 41 such remission or cessation of liability also includes unilateral act of writing off such liability in the books of accounts by the assessee. Revenue without bringing anything on record that the assessee has received some benefit in respect of said trading liability, during the year under consideration, treated the same to be ceased and considered it to be income of the assessee.
As in absence of any material to establish that the assessee has obtained any benefit in respect of the liability on account of sundry creditors, merely on surmises and assumptions it cannot be assumed that there is remission or cessation of liability in the year under consideration - when there is no unilateral act by the assessee in writing off of liability in its books of accounts. In order to attract the provisions of section 41(1) there should have been an irrevocable cessation of liability without any possibility of the same been revived, which has not so been established by the Revenue. Addition on account of sundry creditors is not sustainable in the year under consideration and therefore, is directed to be deleted. As a result, grounds raised by the assessee are allowed.
Addition on account of advances received by the assessee - HELD THAT:- AO did not agree with the plea of the assessee on the basis that some of the loans received from family members were in respect of the film produced by the assessee and therefore the said advances should have been adjusted against the loss incurred on the release of said film - in absence of details of shows not being held, the AO added the advances in respect of such shows.
CIT(A) vide impugned order agreed with the submission of the assessee on the basis that loans/advances cannot be considered as the income irrespective of the operations of the company resulting into profit or loss.
In the present case, it has not been denied that these loans/advances were taken by the assessee in earlier assessment years and no fresh advances were received in the current year - We deem it appropriate to remand this issue to the file of Assessing Officer for de novo adjudication after necessary verification in respect of the claim of the assessee. If upon verification, it is found that the creditor has shown the loan as refundable/receivable and the said position has been accepted by the Revenue in the case of creditor, AO is directed to grant relief to the assessee in respect of the said amount. As regards the advances in respect of various shows, the AO is directed to examine whether such shows/events have taken place. We further direct that such advances can only be taxed in the year in which respective shows have taken place. With the above directions, grounds raised by the Revenue are allowed for statistical purpose.