TaxTMI 
TaxTMI 
2021 (3) TMI 1067
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.... condition precedent stipulated in the First Proviso u/s 147 is not satisfied. ON MERITS. 3. The learned AO failed to appreciate that there was no cessation of liability of Rs. 4,17,71,395/- as per section 41(1) since the credit balance in the account of M/s ILC Industries Ltd., was not written off in the books of account and there was no intimation of any such write off in the books of account of the said creditor. 4. The grounds are taken without prejudice to one another and the Appellant craves leave to add or delete or modify or revise any ground at the time of hearing before the Hon'ble ITAT. For these and other grounds that may be urged at the time of hearing, it is prayed that the Hon'ble /TAT may be pleased to allow the appeal in the interest of the equity and justice." 3. At the time of hearing, the ld. counsel for the assessee has not pressed grounds No.2.1 & 2.2. Accordingly, these grounds are dismissed as not pressed. 4. The facts of the issue are that assessment proceedings for AY 2011-12 was completed u/s. 143(3) of the Income-tax Act, 1961 [the Act]. Original return was processed u/s. 143(1) of the Act and later original assessment was completed u/....
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.... this dispute, the transaction did not materialise and the assessee therefore adjusted the said amount of Rs. 5.60 crores against the amount of Rs. 10 crores received from M/s. ILC Industries Limited. The ledger account of the said party accordingly showed an amount of Rs. 4,17,71,395 as credit balance. The copies of the lawyer Notice and a certified copy of the ledger of the said party as appearing in our books of account were filed before the AO. 7. Apart from the above, the assessee had supplied iron ore to the said party vide Invoice No.23, through Mehboob Transport Company on 22.3..2010 for a sum of Rs. 22,28,605/-, which, obviously does not represent any purchase cost or expenditure to be charged to profits. It is submitted that only an expenditure representing purchase goods or providing of services would constitute an expenditure for the purpose of section 41(1), subject to the condition that the amount is charged to profits and the credit balance is written off by either party. On a plain reading of the ledger account of the assessee in the books of account of M/s. ILC Industries Ltd, (coming into the possession of the AO), it would be clear that there was no supply of go....
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....f assessee company. Being so, it cannot be considered as cessation of liability u/s. 41(1) of the Act. More so, it was a trading liability ceased to exist. 13. We have heard both the parties. It is an admitted fact that the said amount of Rs. 10 crore has been received by the assessee for business purpose i.e., for supply of iron ore fines by assessee and for purchase of iron ore (C-Ore) from them by the assessee. This is evident from the letter dated 12.2.2016 filed by the assessee before the CIT(Appeals). Contrary to this, the contention of ld. AR is that it is not a trading liability so as to bring it under the purview of section 41(1) of the Act. When the money/loan was received by the assessee in the course of carrying on of business, even if it was treated as a loan at the time of receipt, it was in the nature of revenue, on the waiver it had become the assessee's own money, though it was not taken into Profit & Loss account. The benefit was in the revenue field as the money had been received in the course of day to day affairs of assessee. There was no purchase of any capital asset. Thus, the loans received by the assessee from M/s. ILC Industries Ltd. were for circulatin....
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....ter of income becomes income liable to tax. (e) Decisions rendered in CIT v. P. Ganesh Chettiar [1982] 133 ITR 103 (Mad.) and CIT v. Phool Chand Jiwan Ram [1981] 131 ITR 37 (Del.) were of no assistance to the appellant because the same were rendered prior to judgment of the Supreme Court in T.V. Sundaram Iyengar and Sons Ltd. (supra)." Against the orders of the Tribunal, appeal was preferred by the said assessee and the Hon'ble Delhi High Court vide orders dated 18th February, 2011 affirmed the order of the Tribunal. (2) CIT v. Phool Chand Jiwan Ram, 131 ITR 37 (Del) and Tosha International Ltd., 331 ITR 440 (Del) : It was held that they are not applicable in the instant case. In the case of Phool Chand Jiwan Ram (supra) the relevant facts are that the assessee had purchased goods in an earlier year from M/s Narsinghdass Banarsidass, the payment in respect of which was made by M/s Janaki Dass Banarasi Dass. The amount was subsequently waived. The case of the revenue was that the amount so paid should be taken towards purchase of cloth and, therefore, it represents a trading liability. The High Court came to the conclusion that this conclusion was rather far-fetched. The cloth ....
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.... the return for the assessment year 2003-04, it had shown a loan of Rs. 6,80,31,189 payable to M/s Jindal Steel & Power Ltd. (JSPL). It is the JSPL which had return of a sum of Rs. 1,46,53,065 in its books of account. On that premise, the Assessing Officer had treated the same as income of the assessee on the ground that the creditor had written of the said amount and, therefore, it was no more the liability of the assessee and to this extent it was the assessee's gain and added the same under Section 41(1) of the Act. The plea of the assessee in that case was that JSPL had done it unilaterally and without the knowledge of the assessee. The CIT(A) confirmed the addition made by the Assessing Officer in term of Section 41(1) read with Section 28(i) of the Act. The ITAT deleted the addition holding that Section 41(1) of the Act had no application. In the appeal preferred by the Revenue, it did not press the applicability of Section 41(1) Act or Section 28(i) of the of the Act but took a totally different stand namely the said waiver was to be treated as income under Section 28(iv) of the Act. No doubt, the Court held that the amount written of in the books of account by JSPL was ....
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.... launched during financial year 1986-87, assessee company collected a sum of Rs. 500 from each of its customer by sale of coupons - Assessee collected a huge sum under said scheme - Since then, assessee had been showing such sum as outstanding trade liability under head customer advances - During relevant assessment year, Assessing Officer held that there was cessation of liability and, therefore, added such sum to income of assessee - It was found that scheme was valid only for period of twelve months - There was no activity at hands of assessee in connection with scheme for past several years - Not a single customer had demanded money back nor assessee had made any attempt to repay same - In all invoices, signatures of member customers were missing - Their addresses were not sufficient - Over years, company had also invested such amount and earned interest and used such interest for its purpose - Whether on facts, there was cessation of trading liability, thus, Assessing Officer was justified in adding impugned amount to income of assessee - Held, yes [Paras 10 & 12] [In favour of revenue]" 16. Further the Tribunal in Suresh Kumar Jain v. ITO, [2011] 128 ITD 74 (Bang) held as fo....
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....ds, if an amount received in the course of trading transaction, even though it is not taxable in the year of receipt as being the revenue character, the amount changes its character when the amount becomes assessee's own money because of written of by ILC Industry Limited in its books of account and there was no contractual obligation on the part of the assessee to perform its obligation and it should be treated as income of the assessee. Being so, we are of the opinion that the lower authorities are justified in treating the amount of Rs. 4,17,71,395 as income of the assessee u/s 41 of the I.T.Act. 17. The alternative ground of the assessee is that where the assessee's business profit was enhanced on account of addition by invoking the provisions of section 41(1), the assessee is entitled to deduction u/s 10B on the enhanced profit. For this purpose, reliance was placed on the following judgments:- (i) Yahoo Software Development (P.) Ltd. v. DCIT, (2020) 116 taxmann.com 403 (Bang. Trib) (ii) Anthelio Business Technologies (P.) Ltd. v. ITO, 78 taxmann.com 203 (Mum Trib.) 18. We have carefully gone through the above judgments. In the case of Yahoo Software Development (P.) Ltd....