Discounted prepayment of deferred sales tax liability is not remission or taxable benefit when no waiver or cessation is shown.

A deferred sales tax liability paid early at its net present value was held not to amount to remission or cessation of liability, because the assessee merely discharged the obligation at a discounted value and there was no material showing waiver or extinction of the debt. On that reasoning, the conditions for taxing the difference under section 41(1) were not satisfied, and the same amount could not be treated as a revenue receipt or taxable benefit under section 28(iv). The issue was resolved against the Revenue and in favour of the assessee.

---

---

Issues: Whether the difference between the sales tax loan amount and the net present value paid under the State sales tax deferral scheme amounted to remission or cessation of liability under section 41(1) of the Income-tax Act, 1961, or a revenue receipt taxable under section 28(iv) of the Income-tax Act, 1961.

Analysis: The appeal was governed by the principle that a deferred sales tax liability converted into a payment on net present value basis does not, by itself, constitute remission or cessation of liability. The earlier view approved by the Supreme Court held that the assessee had merely discharged the deferred liability prematurely at its correct discounted value, and there was no material to show that the liability had been remitted or ceased. On that footing, the ingredients necessary to attract section 41(1) were not satisfied, and the same transaction could not be treated as a taxable benefit or revenue receipt under section 28(iv).

Conclusion: The question was answered against the Revenue and in favour of the assessee.

Ratio Decidendi: A discounted prepayment of a deferred statutory liability does not amount to remission or cessation of liability unless the taxing provision's conditions are affirmatively satisfied.

---