TMI Blog2012 (8) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of the assessee was in healthy condition - in favour of assessee. - IT Appeal No. 434 (Coch.) of 2010 - - - Dated:- 5-7-2012 - N.R.S. Ganesan, And B.R. Baskaran, JJ. R. Krishnan for the Apppellant. And Smt. S. Vijayaprabha for the Respondent. ORDER B.R. Baskaran, Accountant Member - The appeal of the assessee is directed against the order dated 21-04-2010 passed by the Ld. CIT(A)-IV, Kochi and it relates to the assessment year 2007-08. 2. The assessee is assailing the decision of the Ld. CIT(A) in holding that the gift of Rs. 75.00 lakhs received by the assessee is in the nature of remission of liability and hence taxable u/s. 41(1) of the Act. 3. The facts relating to the issue are stated in brief. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the that concern. It is also not disputed that the assessee owed a sum of Rs. 72.55 lakhs to M/s. Veeriah Reddiar as at the beginning of the year under consideration. There is also no dispute with regard to the fact that the maternal uncle of the assessee, Shri V. Thiruvenkitam, the proprietor of M/s. Veeriah Reddiar, has confirmed the gift of Rs. 75 lakhs given by him to the assessee. The contents of the confirmation letter are extracted in para 3 of the assessment order and the same reads as under: "3. this is to confirm that I have gifted a sum of Rs. 75,00,000 by means of book entry by debit to my personal account on 23-05-2006 to my nephew (sister's son) Dr. T.R. Rajesh Kumar, M/s. Veeriah Reddiar, Alleppey. In fact it was the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee and hence taken the stand that such reduction of liability would amount to "remission of trading liability". The Ld D.R strongly supported the view expressed by the ld CIT(A). 7. However, according to the Ld. AR, the balance outstanding in the account of M/s. Veeriah Reddiar cannot be fully considered as a trading liability (as assumed by the tax authorities), as the said account was having mixed transactions, i.e., the transactions of general nature and also transactions of trading nature. The Ld. AR further submitted that the Assessing Officer would not have invoked the provisions of sec. 41(1), had the assessee received the gift by way of cheque and utilised the proceeds thereof for making payment to M/s. Veeriah Reddiar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 9. Thus, the book entry passed by the assessee by reducing the creditor's balance and increasing the assessee's Capital balance is not the only criteria to be considered for the purpose of invoking the provisions of sec. 41(1) of the Act. What is required to be seen is whether the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. In the instant case, the tax authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reddiat (Distribution) has come down. This amounts to cessation/remission of trading liability. It is clearly shown in paragraphs 6 to 8 that the transaction comes within the purview of section 41(1). The argument of the assessee that section 4191) does not contemplate cessation of a sundry creditor is without any basis. 14. The assessee is pursuing a business. He received the amount in question in the course of business (as detailed above, from the cessation of a trading liability). There is a clear nexus between the activities of the assessee and the amount received by him. Therefore it is not in the nature of a casual or nonrecurring receipt. Accordingly it cannot be considered as a gift. Reliance is placed on the decision of Hon. Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of the assessee was in healthy condition. Hence, in our view, business consideration is totally absent in this case and personal consideration for giving the gift outweighs more here. Hence, we are of the view that there is no case to presume that the concern M/s. Veeriah Reddiar has remitted the liability in favour of the assessee. From the facts prevailing in the instant case, we are of the view that the amount of Rs.75.00 lakhs received by the assessee can only be termed as "Gift". Hence, the provisions of sec. 41(1) cannot be invoked to the said gift received by the assessee. 13. In view of the foregoing discussions, we set aside the order of the Ld. CIT(A) on this issue and direct the Assessing Officer to delete the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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