TMI Blog2007 (8) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... s it was noticed that there were credit balance in the names of two parties amounting to ₹ 3,52,581/- appearing in the books of account of the assessee. On being asked to verify the same, the assessee agreed to surrender it. The said cessation of liability could not be treated to have been earned from business of export and, thus, shall not form part of the turnover of the export business. Aginst assessee. - IT APPEAL NO. 98 OF 2007 - - - Dated:- 20-8-2007 - M.M. KUMAR AND AJAY KUMAR MITTAL, JJ. S.K. Mukhi for the Appellant. JUDGMENT Ajay Kumar Mittal, J. - This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 (for short "the Act") against the order of the Income Tax Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Whether, on the facts and circumstances of the case, the findings of ITAT are perverse and against the evidence on record and, thus, unsustainable in law?" 2. Briefly noticed the facts are that the assessee is a partnership firm dealing in Export of thread bar and it filed its income tax return for the assessment year 2001-02 on 30.10.2001 declaring its income as Rs.5,28,855/-. The assessee claimed deduction under section 80HHC of the Act amounting to Rs.19,65,168/-. The details of export sales as well as other incentives including Duty Draw Back are given as under:- ( i ) Total Turnover Rs. 1,45,91,215/- ( ii ) Export Sales Rs. 1,43,82,742/- ( iii ) Export Incentives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable to tax arising on remission or cessation of trading liabilities. Under the provisions of sub-section (1) of Section 41 of the Act, an assessee who had been allowed any deduction on account of any loss, expenditure or trading liability in any year which ceases to be effective and as a result the assessee receives any amount in respect thereof, the amount so obtained by him or the value of benefit accruing to him is exigible to tax as income of the year in which such remission or cessation has taken place. By introducing fiction, the said receipt is chargeable under the head "income from business or profession." 6. Now adverting to the provisions of Section 80 HHC of the Act, it may be noticed that according to the aforesaid provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion created by virtue of Section 41 (1) can be extended for the purpose of allowing deduction from "profits of the business" as referred to in Section 80 HHC of the Act. The effect of deeming fiction is limited to the purposes and scope for which it has been inserted. The Hon'ble Supreme Court in CIT v. Mother India Refrigeration Industries (P.) Ltd. [1985] 155 ITR 711, while considering the scope of legal fiction observed that the legal fictions are created only for some definite purpose and that must be limited to that purpose and should not be extended beyond their legitimate field. The income chargeable to tax under Section 41 (1) of the Act is from reversal of any loss, expenditure or trading liability which had extinguished or ceased ..... X X X X Extracts X X X X X X X X Extracts X X X X
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