1985 (5) TMI 39

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..... 90,279 cannot be assessed to income-tax during the assessment year 1970-71 under section 41 (1) of the Income-tax Act, 1961 ? " The assessee-firm carried on business in purchase and supply of cotton to various cotton mills. It charged sales tax at the rate of 2 per cent. from its customers while making sales. The amount so collected was shown separately in the bill and credited in the books of account under separate account, styled " General Sales-tax Account ". The amount of sales tax paid to the Government was debited to this account and the unpaid amount was retained in the books of account and was not shown in the profit and loss account of the respective years. During the assessment year 1970-71, however, the assessee transferred ....

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....was not attracted to the case and the amount could not be subjected to tax during the assessment year in question. The Tribunal rejected the reference application of the Revenue observing that its view that the provisions of section 41(1) of the Act were not attracted to the case was given on an appraisal of the evidence on record and did not give rise to any question of law. We are, however, of a different view. Section 41 (1) of the Act is in the following terms: " 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner ....