1985 (6) TMI 16

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....built up on account of earlier years' losses and cash withdrawals by the assessee. By a writing which is described as "retirement and dissolution deed" executed on June 25, 1970, the firm had forgone its right to recover the amount from the assessee with the result that the assessee had not to pay any amount to the firm on account of the amount standing to his debit in the books of the firm. According to the Income-tax Officer, this was a case of retirement of the assessee from the firm and the decision of the firm not to enforce recovery from the assessee brought the case of the assessee within the purview of section 41(1) of the Income-tax Act, 1961. In the alternative, the Income-tax Officer held that in any case this was a capital ga....

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....etween the parties and, therefore, section 41(1) could not be pressed into service. As regards the alternative view of the Income-tax Officer to tax it under section 45 of the Income-tax Act, 1961, the Tribunal found it difficult to sustain it in view of the decision of this court in CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393. The Commissioner of Income-tax, therefore, sought two questions by way of reference for our opinion. They are as under: " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in coming to the conclusion that Rs. 27,645 were not taxable in the assessment year in question under section 41 (1) of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of ....

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....e firm. It, therefore, cannot be said by any stretch of imagination that the assessee had got any amount against the loss or had got some benefit against the trading liability. As a matter of fact, the assessee has never claimed any deduction on account of the trading liability in his personal assessment. What he claimed was the adjustment of the losses which have been adjusted to his account against his income from other sources. Apart from this technical aspect of the matter, even on a consideration of the broad facts, namely, if the capital account had been made, it could not be said that the assessee had got any amount against the loss. In that view of the matter, we have not gone into the other question as to whether the Revenue has be....