TMI Blog2017 (11) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... the asset. The assessee has not closed its business, rather on account of stay operation from the Court manufacturing activities were stopped. The assets were ready for use for the purpose of the business and there was constructive user of the asset. Therefore, depreciation ought to be granted to the assessee - Decided in favour of assessee Addition u/s 41(1) - Held that:- AO has not brought any evidence on the record to show that liability has ceased. The assessee has not written off the liability in the accounts. Therefore, there would not be any addition under section 41(1) of the Act. Hon’ble High Court in the case of Bhogilal Ramjibbhai Atara (2014 (2) TMI 794 - GUJARAT HIGH COURT) considered this aspect and observed that even if d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no business income during the year. The ld.AO further observed that these assets were not used for the purpose of business, therefore the assessee is not entitled for depreciation. Appeal to the ld.CIT(A) did not bring any relief to the assessee. 4. The ld.counsel for the assessee took us through the order of the ld.CIT(A) and submitted that there was dispute with regard to trade mark BABUL . Manufacturing process was stopped by the Court and on account of that there was no business income during the year. According to the assessee, it was a deemed suspension. The business has not been closed down permanently. In subsequent year after litigation is over business has commenced. The ld.DR was unable to controvert this contention of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no manufacturing activity in the business since 13.3.2005, therefore, this liability is to be assumed as ceased. Accordingly, he made an addition of ₹ 54,24,294/-. 8. Appeal to the ld.CIT(A) did not bring any relief to the assessee. 9. With the assistance of the ld.representatives, we have gone through the record carefully. The section 41(1) applies where a trading liability was allowed as a deduction in an earlier year in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in a later year by way of remission or cessation of the liability. In such a case the section says that whatever benefit has arisen to the assessee in the later year by way of remissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the so called creditors . Many of them were not found at all in the given address . Some of them stated that they had no dealing with the assessee . In one or two cases, the response was that they had no dealing with the assessee nor did they know him . Of course, these inquiries were made ex parte and in that view of the matter, the assessee would be allowed to contest such findings . Nevertheless, even if such facts were established through bi - parte inquiries, the liability as it stands perhaps holds that there was no cessation or remission of liability and that therefore, the amount in question cannot be added back as a deemed income under section 41 ( c ) f the Act . This is one of the stran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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