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2016 (8) TMI 416 - ITAT MUMBAI

2016 (8) TMI 416 - ITAT MUMBAI - TMI - Addition u/s. 41(1) - Held that:- The case of the assessee is not within the ambit of remission or cessation liability exist upon the assessee which is not waived by the assessee as well as the creditors.We are of the view that the said amount is not required to be added to the income of assessee u/s.41(1) of the Act. Therefore, these issues are decided in favour of the assessee against the revenue. - Disallowance of expenditure - business was not runni .....

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assets of the company are liable to be deducted. See CIT Vs. Malayalam Plantations Limited (1964 (4) TMI 9 - SUPREME Court ) Therefore, in view of the said circumstances we are of the view that the CIT(A) has passed the order judiciously and correctly which does not require to be interfere with at this appellate stage - Decided against the revenue. - I.T.A. No.3865/MUM/2012, I.T.A. No.4056/M/12 - Dated:- 22-6-2016 - SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH, JM For The Assessee : Shri Vimal P .....

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ee has raised the following grounds of appeal:- "1. For that on the facts and in the circumstances of the case the Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 1,83,848/- u/s. 41(1) of the Income Tax Act, 1961 towards amount payable to Rashtriya Ispat Nigam Ltd. ₹ 1,55,991/- and Prithvi Construction Co. ₹ 27,857/- on account of confirmation having not been produced and this action of the Ld Commissioner of Income Tax (Appeals) is arbitrary .....

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circumstances of the case the addition of ₹ 1,83,848/- u/s. 41(1) of the Income Tax act, 1961 is liable to be deleted. 3. The revenue has raised the following grounds of appeal:- "1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of ₹ 38,30,671/- without appreciating the fact that there is no business activity since 1997 and the expenses which had been allowed as deduction on account of fixed expenditure required f .....

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sued and served upon the assessee. Thereafter the assessment was completed by assessing the total loss to the tune of ₹ 17,11,890/-. The Assessing Officer made an addition u/s.41(1) of the act as cessation of liability and the said action was confirmed by the CIT(A), therefore the assessee has filed the present appeal before us. So far as the appeal of the revenue is concerned, the revenue is dissatisfied to delete the disallowance of ₹ 38,30,671/-. Hence, the revenue is in appeal on .....

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e books of the assessee in the previous year. The representative of the assessee has argued that the amount in question stood as liability in the books of accounts which has not been written off and at this stage it could not be said that the same has been seized or exist therefore addition u/s.41(1) of the Act is not required to be made. In support of this contention the assessee placed reliance on the Income Tax Officer Vs. Aasia Business Venture (P.) Ltd. [2014] 41 taxmann.com 84 (Mumbai-Trib .....

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pon the order passed by the CIT(A). Before discussing further it is necessary to advert the section 41(1) of the Act on record:- (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure of trading liability incurred by the assessee (hereinafter referred to as the first mentioned person) and subsequently during any previous - (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect .....

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business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to .....

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above said sections the following the conditions should be fulfilled before application of the provision under section 41(1), r.w. explanation 1 of the Act. i) In the assessment of an assessee allowance or deduction has been made in respect loss, expenditure or trading liability incurred by him; ii) Any amount is obtained, whether in cash or in any other manner whatsoever, in respect of such trading liability by way of remission or cessation thereof; iii) Such amount or benefit is obtained by t .....

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case in hand, it is apparent that the case of the assessee is not within the ambit of remission or cessation liability exist upon the assessee which is not waived by the assessee as well as the creditors. In view of the said circumstances and relying upon law settled in Income Tax Officer Vs. Aasia Business Venture (P.) Ltd. [2014] 41 taxmann.com 84 (Mumbai-Tribunal and DCIT Vs. Allied Leather Finishers (P.) Ltd. [2009] 32 SOT 549 (Lukh.) and ITO Vs. Shri Dhanjay M. Pandey ITA No.4320/M/10 and .....

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/2012(Revenue s Appeal):- 6. Under this issue the revenue has contested the disallowance of ₹ 38,30,671/-. The assessee claimed the expenditure to the tune of ₹ 56,25,245/-. The Assessing Officer was of the view that the business was not running therefore disallowed the expenditure to the tune of ₹ 38,30,671/- which has been allowed by the CIT(A), therefore, the revenue has filed the present appeal before us. Before going further it is necessary to advert the finding of the CIT .....

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