2004 (12) TMI 20

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....cise duty of Rs. 30,851 which was distributed amongst the partners of the firm was not the income of the assessee-firm? 2. Whether in law and on the facts of the case the Tribunal was justified in holding that the amount of Rs. 30,851 was not assessable under section 41(1) of the Income-tax Act, 1961 in the year under consideration?" The brief facts of the case are as follows: The assessment for the assessment year 1976-77 was initially completed by the assessing authority but was subsequently set aside by the Commissioner of Income-tax. (Appeals) vide his order dated November 14, 1979. The revised return on February 13, 1979, showing total income of Rs. 1,89,410 as against the assessed income of Rs. 3,22,900 was filed. The Commiss....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ct. We have given careful consideration to the submission of learned standing counsel for the Revenue. A sum of Rs. 30,851 was received by the assessee respondent in the accounting year 1969-70. The said amount was not refunded to the customer and has been credited in the profit and loss account for the assessment year 1976-77 and has been distributed amongst the partners. In view of these facts, the application of the provision of section 41(1) of the Income-tax Act arises. Section 41(1) of the act, as it stood at the relevant time reads as under: "41. Profits chargeable to tax.-(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assesse....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e upon a judgment of this court in Indian Motor Transport Co. v. CIT [1978] 114 ITR 677. In this case it was held that if unclaimed amounts are transferred to the profit and loss account, the provisions of section 41(1) of the Act are attracted. We could lay our hands on a recent judgment of the Supreme Court in the case of Polyflex (India) (P.) Ltd. v. CIT [2002] 257 ITR 343. In this case it has been held as follows: "The correct way of understanding section 41(1) would be to read the latter clause- 'Some benefit in respect of such trading liability by way of remission or cessation thereof as a distinct and self-contained provision. To read the phrase 'by way of remission or cessation thereof as governing the previous clause as well ....