2010 (1) TMI 8

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tion of Rs 50 lacs made by the Assessing Officer under the provisions of Section 41(1) of the Income Tax Act, 1961 (hereinafter referred to as the „said Act') on account of alleged cessation of liability. 2. It appears that the assessee had received an order from Premier Automobiles Limited (PAL) for supply of components for Fiat Automobiles manufactured by the latter. PAL advanced a sum of Rs 50 lacs to the assessee towards capital cost to be incurred by the assessee for development/ procurement of tools, jigs, dies, fixtures and moulds required for manufacture of products by the assessee to be supplied by them to PAL. Immediately after the said order was placed and the said sum of money was advanced by PAL, a strike took place in t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ities arose in the present case. The Commissioner of Income Tax (Appeals) also returned a finding that there was no indication or material on the basis of which the assessee could be said to have derived any income or benefit from the sum of Rs 50 lacs received from PAL. It was concluded that there was no finding by the Assessing Officer that the assessee was allowed any deduction or allowance in respect of the said sum of Rs 50 lacs in the past assessment years so as to tax it under the provisions of Section 41(1) of the said Act and, therefore, it was concluded that the assessee was entitled to write off the said amount. 4. The said view was accepted by the Income Tax Appellate Tribunal also. We have examined the impugned order and we fi....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e amount received by the assessee at the instructions of PAL was invested in debentures of Pal enterprises Ltd., a sister concern of M/s PAL. In fact the assessee was left with no amount with him. On paper he was debtor of PAL to the extent of Rs 50 lacs and creditor to PAL Enterprises Ltd to the same extent. By writing back the amount standing in the books of account the assessee had not obtained any benefit in the year under consideration. The amount of Rs 50 lacs was not entered in computation in any of the earlier years nor was any claim of expenditure or loss was made in earlier years therefore provisions of Section 41(1) are not applicable. The decision of Hon'ble Supreme court in the case of CIT v/s T. V. Sundram Iyenger & Sons Ltd. ....