TMI Blog2018 (6) TMI 1506X X X X Extracts X X X X X X X X Extracts X X X X ..... has income from sale of lands. 3. The issue before me is the addition made u/s 41(1) of the Act. 4. After hearing the rival contentions, perusing the material on record, and the order of the authorities below I hold as follows. 5. The Ld. CIT(A) confirmed the addition by observing as under: 6. The fourth ground of appeal is against addition of ₹ 7,36,174/- u/s. 41, being aggregate of certain sundry creditors listed in the assessment order which had been brought forward from earlier years, ,in respect of whom no payments were made during the previous year from whom no purchases also were made during the previous year leading the AO to conclude that the liabilities had ceased. In the written submission, the appellant furnished details of purchases and payments made during the previous year from and to various parties and it is found' from the same that the AO's finding that no purchases from and no payments to the concerned parties were made during the previous year is correct. The appellant also furnished details of payments made to the said parties during the subsequent years. The AO has not commented on the details furnished in the remand report and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w: Profits chargeable to tax. 41. (1) 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 ( hereinafter referred to as the first-mentioned person) and subsequently during any previous year, - (a) the first-mentioned person 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 such person 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 allowance or deduction has been made is in existence in that year or not; or xxxx xx xx xxxxxx xx xxxxxx xx [Explanation 1 - For the purposes of this sub-section, the expression -loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof-shall include the remission or cessation of any liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose words have, in law, acquired a definite and precise sense and that, accordingly, the legislation must be taken to have intended that they should be understood in that sense. In interpreting an expression used in a legal sense, therefore, we have only to ascertain the precise connotation which it possesses in law . In our opinion, this rule should be applied to the interpretation and understanding of the words remission and cessation used in the section. 13. In Bombay Dyeing Mfg. Co. Ltd. vs. State of Bombay AIR 1958 SC 328 the legal position was summarized by T.L. Venkatarama Aiyar, J., in the following manner: It has been already mentioned that when a debt becomes time-barred, it does not become extinguished but only unenforceable in a Court of law. Indeed, it is on that footing that there can be statutory transfer of the debts due to the employees, and that is how the board gets title to them. If then a debt subsists even after it is barred by limitation, the employer does not get, in law, a discharge therefrom. The modes in which an obligation under a contract becomes discharged are well-defined, and the bar of limitation is not one of them. The fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility came to an end as a period of more than 20 years had elapsed and the creditors had not taken any steps to recover the amount and consequently there was a cessation of the debt which would bring the matter within the scope of s. 41(1). It may be noted that the contention of the Revenue in the case before us is precisely the same. To recapitulate, the learned standing counsel contended before us that since a period of more than 4 years has admittedly elapsed from the debt on which the debts were incurred and since the creditors had not taken any steps to recover the amount, there was a cessation of the debts which brought the matter under s. 41 (1). Turning back to the judgment of the Supreme Court, we find that the judgment of the Calcutta High Court under appeal was affirmed for two reasons. The first reason was based on a judgment of the Full Bench of the Gujarat High Court in CIT vs. Bharat Iron Steel Industries (1992) 105 CTR (Guj)(FB) 331 : (1993) 199 ITR 67 (Guj)(FB). It was held by the Supreme Court that the Gujarat High Court was right in saying that in order to attract taxability under s. 41(1) the assessee should have obtained, whether in cash or in any other mann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent thereof to his creditor. Transfer of an entry is neither an agreement between the parties nor payment of the liability. We have already held in Kohinoor Milfs Co. Ltd. vs. CIT (1963) 49 ITR 578 (Born) that the mere fact of the expiry of the period of limitation to enforce it, does not by itself constitute cessation of the liability. In the instant case, the liability being one relating to wages, salaries and bonus due by an employer to his employees in an industry, the provisions of the Industrial Disputes Act also are attracted and for the recovery of the dues from the employer, under s. 33C(2) of the Industrial Disputes Act, no bar of limitation comes in the way of the employees. 15. The Supreme Court noticed that the above observations of the Bombay High Court were quoted by the Calcutta High Court in the judgment under appeal before them, and observed as under while upholding the judgment of the Calcutta High Court : 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. To reinforce the conclusion, the Supreme Court also noticed its earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X
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