2016 (11) TMI 944

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....ed December 24, 2010, for the assessment year 2008-09 on the following grounds : "1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in confirming the addition of a sum of Rs. 17,71,210 on account of the amount payable to the sundry creditors as ceased liability under section 41(1) of the Act. That the orders of both the Commissioner of Income-tax (Appeals) and the learned Assessing Officer are bad in law and on facts." 2. During the course of hearing, arguments were made by Shri Sanjiv M. Shah, authorised representative (AR) on behalf of the assessee and by Shri Rajguru, Departmental representative (DR) on behalf of the Revenue. 3. The solitary issue raised....

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....ll settled position of law ; no addition could have been made under section 41(1) without proving that the liability ceased to exist and that too in the year under consideration. Nothing has been brought on record by the Assessing Officer to show that some benefit has actually accrued to the assessee during the year under consideration. The reliance has been placed on the following cases in support of the proposition that no addition could have been made under section 41(1), unless the liabilities actually ceased to exist and that too during the impugned year : 1. CIT v. Sugauli Sugar Works (P) Ltd. [1999] 236 ITR 518 (SC) ; 2. CIT v. S. I. Group India Ltd. [2015] 379 ITR 326 (SC) ; 3. Chief CIT v. Kesaria Tea Co.....

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.... show that the creditors had discharged the assessee from payments of these liabilities and that too in the year under consideration. It is further noted by us that for the application of the provisions of section 41(1), an assessee must get some benefit in real terms by way of remission or cessation of the liabilities. Our view is supported by many judgments which have been relied upon by the learned counsel. We find it appropriate to reproduce the relevant observation of the honourable Supreme Court form its judgment rendered in the case of CIT v. Sugauli Sugar Works (P) Ltd. [1999] 236 ITR 518 (SC) as follows (headnote) : "The following words in section 41(1) of the Income-tax Act, 1961, are important : 'the assessee had obt....