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M/s. Vipul Ltd., Vipul Tech. Square-I, Gurgaon Versus ACIT, Cent. Circle-2, New Delhi

2016 (7) TMI 1006 - ITAT DELHI

Disallowance under Section 14A - Addition for cessation of liability under section 41(1) - Held that:- Respectfully following the findings of the Hon’ble Jurisdictional High Court in the case of Cheminvest Vs. CIT (2009 (8) TMI 126 - ITAT DELHI-B ), we hold that no disallowance under section 14A of the Act is called for in the case of the assessee as no exempt income was received or receivable during the year under consideration. - Decided in favour of assessee - Addition for cessation of li .....

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his intention not to honour his liability when payment is demanded by them. As we find that the assessee has not remitted the credit balances in respect of the above parties, the assessee has not obtained any benefit in respect of such trading liability and, therefore, provisions of section 41(1), are not applicable to the facts of the case in hand. Thus we hold that the assessee has not obtained any benefit in respect of the creditors by way of remission or cessation thereof and, therefore, no .....

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of Income-tax (Appeals)-III, New Delhi for assessment year 2009-10 and 2010-11 respectively. As both the appeals are related to the same assessee and one ground is common in both the appeals, same are heard together and disposed of by this consolidated order. ITA No. 2153/Del/2013, AY: 2009-10 2. First we take up the appeal in ITA No. 2153/Del/2013, wherein the grounds raised are as under: 1. The learned CIT(A) has erred in law and facts of the case in confirming the addition made by the Assess .....

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d, amend or modify the grounds of appeal. 3. The facts relevant to the issue in dispute are that the assessee company made investment in its subsidiary and other companies during the year as well as in earlier assessment years, however, no exempt income was earned by the assessee company from investments made and, the assessee did not make any disallowance in terms of section 14A of the Income Tax Act, 1961 (in short the Act ). The Assessing Officer invoked rule 8D of the Income Tax Rules, 1962 .....

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6) dated 05/05/2009, upheld the disallowance made by the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal. 4. Before us, the learned Authorized Representative of assessee submitted that the issue in dispute was covered in the favour of the assessee by the judgment of the Hon ble Jurisdictional High Court in the case of Cheminvest Ltd Vs. CIT reported in (2015) 378 ITR 33 (Del.). 5. The learned Senior Departmental Representative, on the other hand, supported the order o .....

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essee? 6. The Hon ble High Court relying upon the case of CIT Vs. Holcim India Private Limited in ITA No. 486/2004 answered the question as under: 23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression does not form part of the total income in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowi .....

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year under consideration. Accordingly, the grounds No. 1 and 2 of the appeal are allowed. 8. The ground no. 3 being general in nature, not required to be adjudicated upon by us. 9. Thus, appeal of the assessee is allowed. ITA No. 4397/Del/2013 for AY: 2010-11 10. Now we take up the appeal in ITA No. 4397/Del/2013 in which following grounds are raised: 1. The learned CIT(A) has erred in law and facts of the case in confirming the addition made by the Assessing Officer for arriving at the satisfac .....

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of ₹ 3,20,055/- by alleging that the unchanged liabilities are no longer in existence and the assessee company has obtained the benefit in respect of the said sums by way of cessation which is incorrect, arbitrary, baseless, unjustified and bad in law. 4. The assessee craves to have the right to add, amend or modify the grounds of appeal. 11. The facts in respect of grounds No. 1 & 2 of the appeal are identical to grounds of the appeal of the assessee for assessment year 2009-10. Since .....

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than three years: Sl. No. Particular Financial year 2007-08 2008-09 2009-10 1. Jattinder Grewal & Ajit, Arjun Singh 1,55,293 1,55,293 1,55,293 2. Blue Star Ltd. 1,13,273 1,13,273 1,13,273 3. Migrani Envirotech Engineers Pvt. Ltd. 50,000 50,000 50,000 4. M. Paul Friedberg Associates Pvt. Ltd. 1,489 1,489 1,489 Total 3,20,055 3,20,055 3,20,055 13. According to the Assessing Officer, the assessee failed to provide their addresses or confirmation from the above creditors and on the basis of the .....

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firmed the finding of the Assessing Officer. 14. Before us, the learned Authorized Representative of the assessee submitted that confirmations from third-party were beyond the control of the assessee company and the Assessing Officer should have obtained the same exercising the powers under section 133(6) of the Act. He further submitted that addition was made by the Assessing Officer on the presumption that either the parties no longer exist or have written off the amount from their books of ac .....

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stified and bad in law. In support of the proposition, he relied on the decisions of the Tribunal in the case of Sh. Vardhman Overseas Ltd. Vs. Assistant Commissioner Of Income Tax reported in (2008) 24 Sot 393(Del) and Income Tax Officer Vs. Janak Steel Tubes (P) Ltd Reported in 31 TTJ 384(Del). 15. On the other hand, the learned Senior Departmental Representative supported the findings of the authorities below. 16. We have heard the rival submissions and perused the material on record. We find .....

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emission of liability by unilateral Act of the debtor or the successor by way of writing off such liability in his accounts will also amount to benefit in respect of such trading liability by way of remission of cessation thereof. In the facts of the instant case, we find that the assessee has not remitted the liability in its books of accounts. It is the Assessing Officer who has presumed that those parties no longer existed or have written off the amounts in their books of accounts. The Assess .....

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icable to the facts of the case in hand. In the case of Shri Vardhman Overseas Ltd. Vs. Assistant Commissioner of Income Tax (supra), the Tribunal has expressed similar views. The relevant findings of the Tribunal in the said case are as under: 10. We have carefully considered the rival submissions in the light of the material placed before us. From the perusal of copy of account of all the parties with regard to which the addition has been made, it revealed that no new amount has been credited .....

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under consideration as the question of genuineness thereof can be examined only in the year in which they were credited in the account of the assessee. The amount also cannot be considered to be the income of the assessee on the ground of expiry of limitation as, according to well settled law explained by Hon'ble Supreme Court in the case of Sugauli Sugar Works (P.) Ltd. (supra) in the absence of creditor, it is not possible for the Department to come to the conclusion that the debt is barr .....

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s a matter which 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 enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act." 11. In view of the above observations of Hon'ble Supr .....

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sessee is on sound footing than the case of the assessee in that case. Therefore, on the ground of expiry of limitation, the addition upheld by the CIT(A) under s. 41(1) cannot be held justified. 12. Their Lordships of Hon'ble Supreme Court in the case of Kesaria Tea Co. Ltd. (supra) have examined the provisions of s. 41(1) and it was observed that for the application of s. 41(1) following points are to be kept in view :- "(1) In the course of assessment for an earlier year, allowance o .....

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ein such benefit was obtained." It was further observed that resort to s. 41(1) could arise only if the liability of the assessee can be said to have ceased finally without the possibility of reviving it. 13. According to the above decision the requirements for application of s. 41(1) are that the assessee himself should acquire the benefit by way of remission or cessation of that trade liability during the year in which such event occurred and such value of benefit is made chargeable to IT .....

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nding in the balance sheet of the assessee and it has also not been shown that these liabilities have ceased finally without the possibility of revival. In our opinion, the onus has wrongly been shifted by the Revenue on the assessee. The assessee has shown these liabilities outstanding in its balance sheet. Therefore, there was no occasion to treat the said amount as taxable under s. 41(1) of the Act and if Department intends to assess the same by applying the provisions of s. 41(1), then the o .....

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