TMI Blog2001 (1) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in law in holding that the provisions of section 41(1) of the Income-tax Act, 1961, were not attracted in respect of the excess provision for bonus amounting to Rs.54,745 written off by the assessee during the year in question?" The learned advocate, Shri B.B. Naik, has appeared for the Revenue and, though served, nobody has appeared for the respondent-assessee. In the circumstances, looking to the importance of the issues involved in this reference application, the learned advocate, Shri J.P. Shah, has been appointed to assist the court as amicus curiae. The facts giving rise to the present reference are as under: For the assessment year, 1979-80, the assessee had written back a sum of Rs.54,746, which was debited as expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said addition had been deleted by the Tribunal. In the facts stated hereinabove, this court has to opine whether the excess provision of bonus amounting to Rs.54,746 could have been added in the income of the assessee during the relevant assessment year. Section 41(1) of the Act at the relevant time read as under: "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, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocate, Shri Naik, that in view of the provisions of section 41(1) of the Act, the Assessing Officer had rightly added the said amount to the income of the assessee and even the Commissioner of Income-tax (Appeals) had rightly confirmed the addition made by the Assessing Officer. On the other hand, the learned advocate, Shri J.P. Shah, appearing as amicus curiae, has submitted that upon a correct reading of section 41(1) of the Act, and in view of a catena of judgments delivered by different High Courts and by the Supreme Court, there was no justification in addition of Rs.54,746 in the income of the assessee for the assessment year 1979-80. It has been submitted by him that upon a perusal of the provisions of section 41(1) of the Act, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter of discharge of his debt even if the debt is barred by the law of limitation. Thus, he has submitted that there was neither remission of the liability by the concerned workmen nor was there cessation of liability and, therefore, the provisions of section 41(1) of the Act could not have been invoked by the Assessing Officer for the purpose of adding the said amount. In the course of arguments, the following judgments have been relied upon by the learned advocates: 1. CIT v. Eastern Spinning Mills and Industries Ltd. [1994] 207 ITR 951 (Cal). 2. CIT v. Agarpara Co. Ltd. [1986] 158 ITR 78 (Cal). 3. Express Newspapers Pvt. Ltd. v. CIT [1997] 227 ITR 325 (Mad). 4. Kesoram Industries and Cotton Mills Ltd. v. CIT [1992] 196 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid that there was a cessation of liability. The liability still remains, though it may not be enforceable at law on account of the provisions of the law of limitation. If one looks at the legal position as depicted in the judgments referred to hereinabove, it is very clear that in a case where the Revenue wants to add any income under the provisions of section 41(1) of the Act, there must be cessation of liability. The case of Kohinoor Mills Co. Ltd. [1963] 49 ITR 578 (Bom) shows that in a case like the one which is on hand, the liability still subsists. The ratio laid down in the case of Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay, AIR 1958 SC 328; [1958] SCR 1122, also supports the assessee. A similar view was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X
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