TaxTMI 
TaxTMI 
2009 (7) TMI 876
X X X X Extracts X X X X
X X X X Extracts X X X X
....unds : "1. (a) The Commissioner of Income-tax (Appeals)-XI, Ahmedabad erred in confirming additions of deep freezer deposits of Rs. 11,60,000 under section 41 of the Income-tax Act. (b) The Commissioner of Income-tax (Appeals) erred in not accepting the contention that these are the liabilities which are reflected in the balance-sheet as liabilities and not written off applicability of section 41 will not arise at all. (c) The Commissioner of Income-tax (Appeals) erred in confirming additions holding that the amount outstanding are purely unclaimed balances ; and transferring the same to sister-concern will not change the real nature of transaction. (d) The Commissioner of Income-tax (Appeals) erred in committing error of facts while holding so, as these balance are not transferred to sister-concern and still remains as liability." 3. During the course of assessment proceedings the Assessing Officer noticed from the balance-sheet of the year under consideration that the assessee has shown deposits amounting to Rs. 66,20,676, which includes deposit of Rs. 11,60,000 in respect of deep freezer deposits. The Assessing Officer required the assessee to explain to whom thes....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The amount outstanding is purely unclaimed balances and transferring of the unclaimed balances in the account of sister-concern will not change the real nature of the transactions. In the case of CIT v. T.V. Sundaram Iyengar and Sons Ltd. [1996] 222 ITR 344 the hon'ble Supreme Court has held that (head note) 'if an amount is received in the course of trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessee's own money because of limitation or by any other statutory or contractual right. When such a thing happens, commonsense demands that the amount should be treated as income of the assessee'. Respectfully following the ratio of the Supreme Court decision in the abovementioned case, the addition of Rs. 11,60,080 made by the Assessing Officer is confirmed." 5. Before us, learned counsel of the assessee Shri Tushar Hemani argued on behalf of the assessee. Shri Jayant Jhaveri, the learned senior Departmental representative argued on behalf of the Department. We have heard the rival contentions. We have also perused the case records including the assessment order as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....time, the claim of the deposit became time-barred and the amount attained a totally different quality." (p. 353) 7. From the above observations, of the hon'ble Apex Court we find that in the case before the hon'ble Apex Court the assessee has transferred the amounts to the profit and loss account but in the present case before us, the assessee has categorically proved that these amounts are not transferred to profit and loss account and claimed the same as income of the assessee during the year. It is also shown to us that these amounts are outstanding as liability in the balance-sheet in the account of deep freezer deposits account. 8. Now coming to the case law cited by learned counsel of the Gujarat High Court in the case of CIT v. Silver Cotton Mills Co. Ltd. [2002] 254 ITR 728/125 Taxman 741 we find that the hon'ble Gujarat High Court in this case has held as under : "Upon a perusal of the provisions of section 41(1) of the Act, it is very clear that for the purpose of adding any amount in a case like the one which is on hand, there should be either remission of the liability by the concerned creditor so that the liability with regard to making payment comes to an end....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 9. Similarly, the hon'ble Gujarat High Court in the case of CIT v. Chetan Chemicals (P.) Ltd. [2004] 267 ITR 770/139 Taxman 301 has held as under : "On a reading of the provisions, it is apparent that before the section can be invoked, it is necessary that an allowance or a deduction has been granted during the course of assessment for any year in respect of loss, expenditure or trading liability which is incurred by the assessee, and subsequently during any previous year the assessee obtains, whether in cash or in any other manner, any amount in respect of such trading liability by way of remission or cessation of such liability. In that case, either the amount obtained by the assessee or the value of the benefit accruing to the assessee can be deemed to be the profits and gains of business or profession and can be brought to tax as income of the previous year in which such amount or benefit is obtained. In the facts of the case on hand, without entering into the aspect as to whether the liability to repay the loans would be a trading liability or not, it is an admitted position that there had been no allowance or deduction in any of the preceding years and, hence, there is....