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2010 (4) TMI 53 - HC - Income TaxSection 41 –Deemed Income – issue of share in lieu of trading liability – cessation of liability - Sh. Parmanand Kashyap, one of the Directors of assessee company, used to purchase spare parts from different parties, on credit, in his own name, since the creditors were personally known to him. A sum of Rs.11,81,045/- was payable to Sh. Parmanand for the purchase made by him for the assessee company. The aforesaid outstanding credit balance was shown in the books of account of the Assessing Company under the sub-head “other supplier”, of main-head “sundry creditors Amount of Rs.11,81,045/- in the account of Sh. Parmanand was changed from “other suppliers” to “Sh. Parmanand” in the audited financial statement of the appellant company for the years 1997-98 and 1998-99. – held that – It is a pre-requisite condition before taking recourse to the Section 41 of the Act that that assessee must have either obtained the amount in respect of the loss, expenditure or trading liability incurred earlier by it or it should have received any benefit in respect of such trading liability by way of remission or cessation thereof. - Mere change of nomenclature in the books of account without anything more brings no benefit to the assessee and its liability to pay to the creditor does not get extinguished, merely by change of nomenclature or by change of the sub-head under which the liability is shown in the account books of the assessee. - question whether the liability continued to exist or not was a question of fact and, therefore, Section 41 would be inapplicable and no question of law arose in the case – decided in favor of assessee
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