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TMI Blog2010 (6) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel also explained the import of grounds Nos. 1 and 2 that the authorities below had brought to tax an amount of Rs. 33,89,860, in respect of two creditors, which remained outstanding at the end of this year also. These amounts pertained to Laser Graphics P. Ltd. and Laser Graphics from the assessment year 2000-01 in respect of designing and printing. These amounts were not written off in this year as well. Therefore, his contention is that the learned Commissioner of Income-tax (Appeals) erred in bringing this amount to tax in this year. 2. The facts, as mentioned in the assessment order, are that the assessee had shown liabilities of Rs. 33,89,860 and Rs. 1,16,378 in the names of Laser Graphics P. Ltd. and Laser Graphics resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dible in the total income of the assessee. He also rectified the error committed by the Assessing Officer in not adding the sum of Rs. 1,16,378, in respect of Laser Graphics, to the total income of the assessee. 4. Before us, learned counsel explained the facts of the case. There is no dispute that the credits arose in the assessment year 2000-01, the present whereabouts of the creditors are not known, and no correspondence has taken place between the assessee and the creditors since the liability arose. However, it was stressed that the amounts have not been credited to the profit and loss account. In the absence thereof, the liability continued to exist and, therefore, the amounts could not have been brought to tax either under section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d them since the year 2001. 8. Coming to the case of T.V. Sundaram Iyengar & Sons Ltd. (supra) (SC), the facts are that the assessee had received certain advances in the course of business, which were initially treated as capital in nature. However, by efflux of time, these amounts were written off to the credit of the profit and loss account as nobody came to claim the amount. Thus, the assessee treated the amounts as his own money. The hon'ble court came to the conclusion that the common sense approach will show that the character of the amounts change and the assessee has become richer accordingly. Therefore, the money should be taken as income of the assessee as it has been credited to profit and loss account. The relevant observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court. The facts of that case are also distinguishable. That the assessee had taken a loan of Rs. 6,86,071 for the business purpose. As per consent terms, arrived at in a suit, the assessee credited this amount to the profit and loss account. The decision of the hon'ble court is that since the loan was taken for trading activities, its character changed when the amount was credited to the profit and loss account. In this context the following observations were made by the hon'ble court Solid Containers Ltd.'s case (supra) page 421 of 308 ITR) : "The present appellant can hardly derive any advantage from the case of Mahindra and Mahindra Ltd. v. CIT [2003] 261 ITR 501 (Bom.). As in that case, a clear finding was recorded that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the facts are that the assessee wrote off a sum of Rs. 1,16,240 in respect of unclaimed wages and sundry credit balance. By relying on the decision in the case of Sugauli Sugar Works P. Ltd. (supra) (SC), it was contended that the liability did not cease to exist by merely passing entries in the books of account. In this connection, the attention of the hon'ble court was drawn towards the amendment made in section 41, by which an Explanation was inserted with effect from April 1, 1997, to the effect that unilateral act of writing off the amount to the credit of the profit and loss account would be deemed to be the income. His case was that prior to April 1, 1997, a unilateral act of writing off of a liability could not be treated as incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s enough to refer to the decision of this court in Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay, AIR 1958 SC 328; [1958] SCR 1122. If that principle is applied, it is clear that mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not enable the debtor to say that the liability has come to an end. Apart from that that will not by itself confer any benefit on the debtor as contemplated by the section." 13. Having considered all these cases, we are of the view that the decision in the case of Sugauli Sugar Works (P.) Ltd. (supra) is applicable to the facts of the case more so when the liability has not been written off in the accounts of the assessee. In such circu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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