TaxTMI 
TaxTMI 
2005 (7) TMI 71
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 260A of the Income-tax Act, 1961, which was admitted on the following substantial question of law: "Whether the Tribunal was right in treating the amount of Rs. 23,66,695 (the amount which was written off by the sister concern of the assessee) as the income in the hands of the assessee and on that count liable to be taxed under section 41(1) of the Income-tax Act?" We have heard learned couns....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the earlier year, the addition as deemed profits under section 41(1) in respect thereof would not be permissible. The same view was taken in CIT v. Thakurdas [1984] 147 ITR 549 (MP) ; CIT v. Khamiti Lal and Co. [1989] 178 ITR 265 (P & H); CIT v. Lal Textile Finishing Mills P. Ltd. [1989] 180 ITR 45 (P & H); CIT v. Pranlal P. Doshi [1993] 201 ITR 756 (Guj) and CIT v. Western Rolling Mills Ltd. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in determining the profit under section 41(1) of the Act." In the order of the Assessing Officer it has been stated: (ii) No deduction had been allowed in respect of the above amounts received from M/s. India Leather Corporation (P) Ltd., and the assessee did not derive any benefit in respect of the above liability." In the order of the Commissioner of Income-tax (Appeals) also it has been sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) and Indian Motor Transport Co. v. CIT [1978] 114 ITR 677 (All), etc. Section 41(1) of the Income-tax Act creates a legal fiction, and hence has to be strictly complied with if any addition in the income is sought to be made by the Revenue. Thus, the question sought to be raised before us goes to the root of the matter because unless an allowance or deduction has been made in the previous year ....