Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (7) TMI 836 - AT - Income TaxAddition u/s 41(1) - assessee submitted that there was a family settlement between the group members and the assets and liabilities were reallocated - CIT(A) deleted the addition - Held that:- After going through the provisions of section 41(1) of the income tax act, we find that the same are not applicable to the facts of the assessee case. We also find that the AO has made the addition of ₹ 5.64 crore by invoking provision of sec. 41(1) of the income tax without stating how the provision are applicable to the assessee's case. Mere cessation of liability does not result into fit case of sec. 41 (1) of the I.T. Act. Assessee has submitted that assessee was not incurred any loss/expenditure/trading liability which is subsequently recovered by him is taxable as income in the year of recovery. We find that the assesse is squarely covered by the following judgments wherein it has been held that whenever, an amount is borrowed towards capital account and the loan is waived off, the same cannot be brought to tax net either in terms of sec-41 (1) or 28(iv) of the Act. See CIT vs. Tosha lnternational Ltd. [2008 (9) TMI 31 - HIGH COURT DELHI] & CIT vs. Phool Chand Jiwan Ram (1980 (4) TMI 29 - DELHI High Court) We further note that it is well settled law that where no deduction/allowance has been made in respect of loss, exp/liability in the assessment year or in any earlier years, cessation of such liability cannot be taxed under section 41(1) of the Income Tax Act. The assessee has clearly established that the adjustments are on capital side and there is no case for invoking provisions of S.41(1) since the liability waived by the creditor was never claimed as revenue expenditure. - Decided in favour of assessee.
|