Section 41(1) applies only on actual benefit or remission; a mere book entry does not create taxable income.

Section 41(1) of the Income-tax Act applies only where an earlier allowance or deduction was made and the assessee later obtains an amount or benefit in respect of the same loss, expenditure or trading liability by remission or cessation. A mere unilateral book entry, including transfer from sundry creditors to the profit and loss account, without actual receipt of money or a fresh benefit in the relevant year, does not by itself attract the deeming provision. On the stated facts, no taxable income arose in the assessment year under reference.

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Issues: Whether the amount credited to the profit and loss account could be included in the assessee's income for the assessment year 1967-68 under section 41(1) of the Income-tax Act, 1961.

Analysis: Section 41(1) applies only when an allowance or deduction has earlier been made and, in a subsequent previous year, the assessee has obtained an amount or benefit in respect of that loss, expenditure or trading liability by remission or cessation. The Tribunal's finding that the relevant adjustment had already been made in 1950 was treated as final. No cash or actual amount was received in the year under reference, and the later transfer from the sundry creditors' account to the profit and loss account was only a book entry. A unilateral accounting entry, without receipt of money or a fresh benefit in the relevant year, does not by itself attract the deeming provision.

Conclusion: The amount was not taxable in assessment year 1967-68 under section 41(1); the question was answered in favour of the assessee.

Ratio Decidendi: Section 41(1) can be invoked only where the assessee actually obtains an amount or benefit in the relevant year in respect of an earlier allowed loss or liability; a mere unilateral transfer between accounts, without receipt or a new remission or cessation in that year, does not create taxable income.

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