By Jagadish D. Shah, Jagdish T. Punjabi
Chartered Accountants
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New Page 2
(Full texts
of the following Tribunal decisions are available at the Society’s office on
written request. For members desiring that the Society mails a copy to them,
Rs.30 per decision will be charged for photocopying and postage.)
1. Nash Machines & Electronics Pvt. Ltd. v.
Jt. CIT
ITAT ’A’ Bench, Pune
Before Mukul Shrawat (JM) and
D. Karunakara Rao (AM)
ITA Nos. 163/PN/2008
A.Y. : 2004-05. Decided on : 30-11-2009
Counsel for assessee/revenue : C. N. Vaze/
Amrinder Kumar
S. 41(1) — Remission or cessation of liability — Receipt of
advance money against order remaining unclaimed — Creditor under liquidation —
Whether AO justified in treating the unclaimed sum as income — Held, No.
Per Mukul Shrawat :
Facts :
The assessee had received the sum of Rs.36.33 lacs in the F.Y.
1996-97 from a party called PMA Ltd. as advance against sales. Before the
assessee could supply the material, PMA went into liquidation. The last
correspondence with the party was in February 1999 when a liquidator informed
the assessee about the fact of liquidation.
Applying the ratio of the decision of the Supreme Court in
the case of T. V. Sundaram Iyenger & Sons Ltd., of the Chennai High Court in the
case of Aries Advertising Pvt. Ltd. and of the Delhi High Court in the case of
State Corporation of India Ltd., the AO treated the said unclaimed amount as the
income of the assessee. On appeal the CIT(A) agreed with the order of the AO and
noted that since the amount remained unpaid for a long period, it assumed the
character of trade receipt taxable u/s.41(1) of the Act. He also relied on the
decision of the Karnataka High Court in the case of Mysore Thermo Electric Pvt.
Ltd.
Held :
According to the Tribunal, the provisions of S. 41 would
apply where an allowance or deduction had been made of loss or expenditure in
the assessment of earlier year and in any subsequent years the assessee availed
the benefit by way of remission or cessation of such trading liability. In the
case of the assessee, the impugned amount was not of the character of ‘trading
liability’ for which the assessee had ever obtained any benefit or deduction or
allowance in any of the past years. Further, there was no evidence or any
specific communication to indicate the remission or waiver of debt by the
creditor. Hence, according to the Tribunal, the provisions of S. 41(1) were not
applicable. For the purpose it also relied on the decisions of the Calcutta High
Court in the case of S. K. Bhagat & Co. and of the Rajasthan High Court in the
case of Shree Pipes Ltd. According to it, all the decisions relied on by the
lower authorities were distinguishable on facts and hence, not applicable to the
case of the assessee.
Cases referred to :
1. S. K. Bhagat & Co. v. CIT, 275 ITR 464 (Cal.);
2. CIT v. Shree Pipes Ltd., 301 ITR 240 (Raj.);
3. U. B. Engineering Ltd., ITA No. 1368/PN/06 dated
31-8-2009;
4. T. V. Sundaram Iyenger & Sons Ltd., 222 ITR 344 (SC);
5. CIT v. Aries Advertising Pvt. Ltd., 255 ITR 510 (Mad.);
6. CIT v. State Corporation of India Ltd., 247 ITR 114
(Del.);
7. Mysore Thermo Electric Pvt. Ltd. v. CIT, 221 ITR
504 (Kar.)
