TMI Blog2011 (5) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... t year. - Decided in favor of assessee - I.T.A. No.617 of 2004 - - - Dated:- 18-5-2011 - Mr. Justice Bhaskar Bhattacharya, Mr. Justice Sambuddha Chakrabarti, JJ. For the Appellant: Mr. J. P. Khaitan, Mr. R. L. Mitra, Mr. S. S. Roy. For the Respondent: Mr P. K. Bhowmick. Bhaskar Bhattacharya, J.: 1. This appeal under Section 260A of the Income-tax Act, 1961 is at the instance of an assessee and is directed against an order dated April 16, 2004 passed by the Income-tax Appellate Tribunal, B Bench, Kolkata, in Income-tax Appeal bearing ITA No.892(Kol)/2003 for the Assessment Year 1995-96. 2. The facts giving rise to filing of this present appeal may be summed up thus: a) The assessee is a public limited liability company within the meaning of the Companies Act, 1956 which carries on business of growing and manufacturing tea. The assessee has 17 tea gardens and its employees from time to time come from the gardens to the assessee s headquarters at Calcutta for the purpose of the assessee s business. The assessee maintains a transit flat at Calcutta for the garden employees who come to the Headquarters for official work which is used exclusively for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view of the Assessing Officer on both the grounds. f) Being dissatisfied, the assessee preferred an appeal before the Incometax Appellate Tribunal and by the order impugned in this appeal, the said Tribunal has dismissed the appeal and upheld the view of the Commissioner of Income-tax (Appeals). g) On the issue relating to transit expenditure, the Tribunal followed its orders for the Assessment Years 1993-94 and 1994-95 and with regard to the sum of Rs.5,02,646/-, the Tribunal held that writing off the said amount in the books of account was not an unilateral act of the assessee but had resulted out of the creditors conduct in not presenting the cheques to the Bank for encashment within the validity period and not claiming the amount from the assessee within the limitation period and the assessee had also not shown any desire to pay the amount to the creditors. The Tribunal held that liability in respect of the said amount was extinguished or remitted within the meaning of Section 41(1) of the Act. 3. Being dissatisfied, the present appeal has been filed. 4. A Division Bench at the time of admission of the appeal formulated the following substantial questions of law: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaria Tea Co. Ltd., reported in AIR 2002 SC 434. 8. Mr. Khaitan contends that the learned Tribunal below committed substantial error of law in holding that the provisions contained in Section 41(1) of the Act are attracted in the facts of the present case. 9. Mr. Bhowmick, the learned counsel appearing on behalf of the Revenue has, on the other hand, opposed the aforesaid contention of Mr. Khaitan and has contended that the Tribunal below has rightly held that Section 41(1) of the Act was applicable from the materials on record. In support of such contention, Mr. Bhowmick has relied upon the decision of the Supreme Court in the case of Commissioner of Income-tax Vs. T. V. Sundaram Iyengar and Sons Ltd. reported in (1996) 222 ITR 344. 10. In order to appreciate the aforesaid question, it will be profitable to refer to the provision contained in Section 41(1) of the Act which is quoted below: 41. Profits chargeable to tax. [(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt. The said words have been considered by a Full Bench of Gujarat High Court in detail in The Commissioner of Income-tax, Gujarat-II, Ahmedabad v. M/s. Bharat Iron and Steel Industries, Bhavnagar, 1993 Tax LR 188. The following passages in the judgment brings out of the reasoning of the Full Bench succinctly (At Pp. 195 and 196 of Tax LR): "11. In our opinion, for considering the taxability of amount coming within the mischief of S. 41(1) of the Act, the system of accounting followed by the assessee is of no relevance or consequence. We have to go by the language used in S. 41(1) to find out whether or not the amount was obtained by the assessee or whether or not some benefit in respect of trading liability by way of remission or cessation thereof was obtained by the assessee and it is in the previous year in which the amount or benefit, as the case may be, has been obtained that the amount or the value of the benefit would become chargeable to income-tax as income of that previous year. 12. We fully agree with the view taken by the Division Bench in CIT v. Rashmi Trading, 1977 Tax LR 520 (Gujarat) (supra) that the only meaning that can be attached to the words "obtained, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit accruing to the assessee is deemed to be the profit and gains of business which otherwise would not be his income; and (4) such value of benefit is made chargeable to income tax as the income of the previous year wherein such benefit was obtained. The High Court, agreeing with the Tribunal, rightly held that the resort to Section 41(1) could arise only if the liability of the assessee can be said to have ceased finally without the possibility of reviving it. On the facts found by the Tribunal, the Tribunal as well as the High Court were well justified in coming to the conclusion that the purchase tax liability of the assessee had not ceased finally during the year in question. Despite the finality attained by the judgment in Neroth Oil Mills' case, the other issues having bearing on the exigibility of purchase tax still remained and the dispute between the assessee and the sales-tax department was still going on. There is no material on record to rebut these factual observations made by the Tribunal. Nor can it be said that the reasons given by the Tribunal are irrelevant. The learned senior counsel appearing for the Income-tax Department has contended that the assessee its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon by the learned counsel for the Revenue in the case of M/s. Kesaria Tea Co. Ltd (supra) and the Supreme Court in paragraph 6 of the judgement dealt with the decision by making the following observations: The decision of this Court in Commissioner of Income-tax v. T. V. Sundaram Iyengar and Sons Ltd. (222 ITR 344) has been cited by the learned counsel for the appellant. We find no relevance of this decision to the determination of the question involved in the present case. The factual matrix and the provision of law considered therein is entirely different. 18. We also propose to adopt the same observations in the above decision. Moreover, as pointed out in the case of Suguli Sugar Works (P) Ltd. (supra), vide the last five lines of the paragraph 6 of the judgement, the question whether the liability is actually barred by limitation is not a matter which can be decided by considering the assessee's case alone but has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt is barred and has become unenforceable. There may be circumstances which may en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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