TaxTMI 
TaxTMI 
2012 (7) TMI 213
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....d of section 41(1) of the Income-tax Act, 1961.] 2. The brief facts of the case are that the assessee is a corporation owned by the State Government of Delhi. It has filed its return of income on 30th October 2002 declaring nil income. An assessment order was passed under section 143(3) on 18.2.2005. The assessee has shown existing liability. Learned Assessing Officer harbored a belief that these liabilities have ceased to exist and, therefore, additions to be made. He made the following the additions: i) Rs.16,25,575- the liability representing interest payable to DSIDC; ii) Rs.9,16,951- liability representing royalty payable to the State Government; iii) Rs.3,52,278 - salary payable by the assessee; iv) Rs.3,76,507 - repres....
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....nd interest were transferred to DSMDC along with the corresponding liability and same is still appearing in the books of account of DSMDC. The DSMDC has no business activities as mining operations in Delhi were prohibited by Delhi Administration and it has again been decided to merge DSMDC with DSIDC. The merger proceedings are in progress and necessary approval has been accorded by Board of both the companies and the matter is at the final stage and accordingly the action of the Assessing Officer in treating the same as cessation of liability in terms of provisions of sec. 41(1) is highly uncalled for and arbitrary and against the legal principles as clarified above. This is not a case of trading liability and even otherwise the assesse....
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....lary payable to the employees' pending final settlement of accounts. The liability on account of salary to employees is a statutory obligations of the employer and when the claim in respect of the liability has been allowed, there cannot be any presumption that same is not payable or assessee has obtained any remission or cessation. The presumption of Assessing Officer that same is deemed to be not payable is highly uncalled for and same is contrary to requirement of provisions of sec. 41(1). In the light of legal principles explained above, the Assessing Officer is not justified to make addition in respect of the same by invoking provisions of sec. 41(1). d) Expenses payable and other liabilities - Rs.3,76,507/- In respect of this it....
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....n incorporated in the Act to cover a particular facts situation. Section applies where a trading liability was allowed as a deduction in earlier years in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in later year by way of remission or cessation of the liability. In such a case, the section says that whatever benefit has arisen to the assessee in the later year by way of remission of the liability will be brought to tax in that year. The principle behind the section is that a provision intended to ensure that the assessee does not get away with a double befit once by way of a deduction in an earlier assessment year and again by not being taxed on the benefit recei....