2014 (2) TMI 794 - GUJARAT HIGH COURT

Applicability of Section 41(1) of the Act – Deletion made u/s 41(1) of the Act – Profits chargeable to tax – Held that:- The Tribunal was of the view that there is no finding that the liabilities were trading liabilities in respect of which the assessee had obtained any benefit or advantage either by way of their remission or cessation in the year under appeal - The assessee has not written off the liabilities shown in the accounts - The A.O. has not brought sufficient material on records to establish as to how the ingredients of section 41(1) are satisfied so as to bring the addition within its ambit.

Section 41(1) of the Act would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled - There was nothing on record to suggest there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08 which was the year under consideration - The Assessing Officer undertook the exercise to verify the records of the so called creditors - thus, the amount in question cannot be added back as a deemed income under section 41(c) of the Act – Decided against Revenue.