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TMI Blog1999 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... ith reference to the deposits and advances which had been paid back and he included a sum of Rs. 2,56,529 under section 41 of the Income-tax Act in the total income of the assessee. The assessee went on appeal before the Appellate Assistant Commissioner and the order of the Income-tax Officer was confirmed. The assessee carried the matter to the Tribunal. The Tribunal accepted the contention of the assessee and held that its unilateral entry in the accounts transferring the amount to the capital reserve account would not bring the matter within the scope of section 41(1) of the Income-tax Act and consequently held in favour of the assessee. The decision of the Tribunal was challenged before the High Court. The High Court observed (see [1983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act. Section 41(1) reads as follows : "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 and subsequently during any previous year, 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, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case. It is the practice of the assessee to write back such unclaimed and unspent liabilities from year to year on grounds of bar of limitation of the liability and to get away without paying tax on such amount written back to profit on the same plea. This has been happening since the assessment year 1977-78. This fact, to our mind, is very significant. One more notable feature is that the assessee never divulged to the Assessing Officer the details and particulars of the claims despite specific enquiry. These two factors combine to lend to the case a colour different from the case relied upon on behalf of the assessee." The Bench distinguished the other decisions referred to before it by pointing out that the facts were entirely di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round when the question of inclusion of such amount in his income under section 41(1) of the Act arose. The Bench distinguished the judgment in Kohinoor Mills Co. Ltd. v. CIT [1963] 49 ITR 578 (Bom), by observing that there was no cessation of liability in that case despite the expiry of period of limitation to enforce the same. The Bench said that the assessee could not get rid of his liability when called upon to meet it either by the employees under the Industrial Disputes Act or by the Government under the Bombay Labour Welfare Fund Act on account of the special provisions of those Acts. We are unable to accept the reasoning of the Bombay High Court in that case. Just because an assessee makes an entry in his books of account unilatera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. We fully agree with the view taken by the Division Bench in CIT v. Rashmi Trading [1976] 103 ITR 312 (Guj), that the only meaning that can be attached to the words 'obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure' incurred in any previous year clearly refer to the actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r his liability when payment is demanded by the creditor, or a contract between the parties, or by discharge of the debt---the debtor making payment thereof to his creditor. Transfer of an entry is neither an agreement between the parties nor payment of the liability." This judgment has been quoted by the High Court in the present case and followed. We have no hesitation to say that the reasoning is correct and we agree with the same. The principle that expiry of the period of limitation prescribed under the Limitation Act could not extinguish the debt but it would only prevent the creditor from enforcing the debt, has been well settled. It is enough to refer to the decision of this court in Bombay Dyeing and Manufacturing Co. Ltd. v. Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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