TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 741
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....e reason for the same. The AO made an addition u/s 41(1) of the Act. On appeal the First Appellate Authority upheld the same. 3. After hearing the rival contentions I held as follows : Before me the assessee relies on a number of decisions and submits that section 41(1) of the Act cannot be attracted in the facts and circumstances of the case. I find that no addition can be made of any sundry creditor or loan brought forwarded from the earlier year, just because the assessee has not been able to furnish the required details as held by the Hon'ble Delhi High Court in the case of CIT vs Shri Vardman Overseas Ltd. (2012) 343 ITR 408. 4. The Hon''ble ITAT 'A 'Bench of Bangalore Tribunal in ITA No.1078/Bang/2014 for A.Y.2009-10 in the case of Glen Williams vs ACIT order dated 07.08.2015 analyses section 41(1) and held as follows :- "14. As far as applicability of section 41 (1) of the Act is concerned, the question before us is limited to the applicability of Section 41 (1) of the Act. The section in so far as it is relevant for our purpose is as below: "Profits chargeable to tax. 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect ....
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.... AO or CIT(A) to the expression "remission or cessation of liability". In such circumstances, we are of the view that the provisions of section 41 (1) of the Act could not be invoked by the Revenue. In fact the decision of the Hon'ble Delhi High Court in the case of Vardhaman overseas Ltd. (supra) clearly supports the plea of the Assessee in this regard. On identical facts, the Hon'ble Delhi High Court on the applicability of Sec.41 (1) of the Act, held: "12. That takes us to the next question as to what constitutes remission or cessation of the liability. It cannot be disputed that the words "remission" and "cessation" are legal terms and have to be interpreted accordingly. In State of Madras vs. Gannon Dunkerley & Co. AIR 1958 SC 560 Venkatarama Aiyyar J. explained the general rule of construction that words used in statutes must be taken in their legal sense and observed: "The ratio of the rule of interpretation that words of legal import occurring in a statute should be construed in their legal sense is that those words have, in law, acquired a definite and precise sense and that, accordingly, the legislation must be taken to have intended that they should be unde....
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....ning from 1946-47 to 1948-49 to the capital reserve account. The ITO found that a sum of 1,29,000 out of the above amount repaymented deposits and advances which were paid back by the assessee. He, therefore, deducted this amount from the amount of 3,45,000 and the balance of 2,56,529 was brought to assessment under s. 41 (1) of the Act. The assessee appealed unsuccessfully to the AAC and thereafter carried the matter in further appeal to the Tribunal. Its contention before the Tribunal was that the unilateral entry of transferring the amount from the suspense account to the capital reserve account would not bring the said amount within s. 41(1). The contention was accepted by the Tribunal whose decision was affirmed by the Calcutta High Court CIT vs. Sugauli Sugar Works (P) Ltd. (1981) 23 CTR (Cal) 226 : (1983) 140 ITR 286 (Cal). The Revenue carried the matter in the appeal to the Supreme Court. The contention of the Revenue (as noted at p. 520 of 236 ITR) was that on the facts of the case, the liability came to an end as a period of more than 20 years had elapsed and the creditors had not taken any steps to recover the amount and consequently there was a cessation of the debt whi....
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.... High Court in the judgment cited above are as under: "The question to be considered is whether the transfer of these entries brings about a remission or cessation of its liability. The transfer of an entry is a unilateral act of the assessee, who is a debtor to its employees. We fail to see how a debtor, by his own unilateral act, can bring about the cessation or remission of his liability. Remission has to be granted by the creditor. It is not in dispute, and it indeed cannot be disputed, that it is not a case of remission of liability. Similarly, a unilateral act on the part of the debtor cannot bring about a cessation of his liability. The cessation of the liability may occur either by reason of the operation of law, i.e., on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to Honour his liability when payment is demanded by the creditor, or a contract between the parties, or by discharge of the debt the debtor making payment thereof to his creditor. Transfer of an entry is neither an agreement between the parties nor payment of the liability. We have already held in Kohinoor Milfs Co. Ltd. vs. CIT (1963) 49....