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April 2010

Deemed profit : S. 41(1) of Income-tax Act, 1961 : A.Y. 1996-97 : Outstanding liability : Continued as liability in the books : Liability not written back : Liability cannot be said to have ceased to exist : It cannot be treated as income u/s.41(1).

By K. B. Bhujle | Advocate
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5. Deemed profit
: S. 41(1) of Income-tax Act, 1961 : A.Y. 1996-97 : Outstanding liability :
Continued as liability in the books : Liability not written back : Liability
cannot be said to have ceased to exist : It cannot be treated as income
u/s.41(1).


[CIT v. GP International Ltd.,
229 CTR 86 (P&H)]

For the A.Y. 1996-97, the
Assessing Officer made an addition of Rs.3,30,000 in respect of the outstanding
amount payable to one M/s. ACP relying on the provisions of S. 41(1) of the
Income-tax Act, 1961. The Tribunal found that the assessee has continued to show
the liability as the outstanding liability and has not written back the same.
The tribunal therefore deleted the addition.

On appeal by the Revenue, the
Punjab and Haryana High Court upheld the decision of the Tribunal and held as
under :

“The assessee having shown the
amount payable by it to another company as an existing liability in its books
and not written back the same, it cannot be said that the aforesaid liability
has ceased to exist and, therefore it cannot be treated as income by invoking
the provisions of S. 41(1).”

 

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