2018 (9) TMI 230

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....he respondent-assessee had filed its return on 30th October, 2005, declaring a loss of Rs. 32,27,360/-. 2. The issue raised in the present appeal relates to addition of Rs. 2,61,72,160/- made by the Assessing Officer under Section 41(1) of the Act, which addition was deleted by the Commissioner of Income-tax (Appeals) ['CIT (Appeals)' for short]. The Tribunal vide impugned order has dismissed the second appeal filed by the Revenue holding that there was no evidence of cessation of liability. 3. It is an undisputed and admitted fact that the respondent-assessee had an outstanding liability of Rs. 2,61,72,160/- due and payable to M/s. P.T. Polysindo, Jakarta, Indonesia since 31st March, 2003. This liability was shown and acknowledged in the....

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....f, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing....

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...." in common parlance and in context in which it is used in Section 41(1) of the Act connotes that the debt has become extinct, has come to an end or it has been forfeited. "Remission" implies cancellation or extinguishment of all or part of the financial obligation on part of the creditor. 6. Explanation to the Section states that the loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof, shall include remission and cessation of any liability by unilateral act of the first mentioned person i.e. the assessee. The explanation therefore refers to the conduct of the assessee. We need not refer to Clause (b) to Section 41(1) for the said clause is not applicable. 7. In the present....

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....d that the debt or liability may subsist notwithstanding its recovery was barred by limitation for the law of limitation merely bars the creditor from invoking legal remedy. In Commissioner of Income Tax Vs. Sugauli Sugar Works (P) Ltd., (1999) 2 SCC 355, it was elucidated that expiry of period of limitation as prescribed in the Limitation Act does not extinguish the debt but only prevents the creditor from enforcing the debt. This is the right and correct position in law as held by the Bombay High Court in Kohinoor Mills Co. Ltd. Vs. Commissioner of Income-tax [1963] 49 ITR 578 (Bom.) and Bhagwat Prasad and Co. Vs. Commissioner of Income-tax (1975) 99 ITR 111 (All). In this context the admission and acknowledgement of the debt and liabilit....