Search Results For: cessation


ITO vs. Vikram A. Pradhan (ITAT Mumbai)

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DATE: August 24, 2016 (Date of pronouncement)
DATE: November 14, 2016 (Date of publication)
AY: 2008-09
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CITATION:
S. 41(1): Amounts shown as liabilities in the Balance Sheet cannot be deemed to be cases of "cessation of liability" only because the liabilities are outstanding for several years. The AO has to establish with evidence that there has been a cessation of liability with regard to the outstanding creditors

When the Assessing Officer was of the view that there was cessation of liability in the case on hand, it was incumbent upon him to cause necessary enquiries to be made in order to bring on record material evidence to establish the requirement for invoking the provisions of section 41(1) of the Act. The very fact that the assessee reflects these amounts as creditors in his Balance Sheet as on 31/3/2007, is an acknowledgement of his liability to these creditors and this also automatically extends the period of limitation under section18 of the Limitation Act. Once the assessee acknowledges that the debts to creditors are outstanding in his Balance Sheet, that he is liable to pay his creditors, Revenue cannot suo-moto conclude that the creditors have remitted their liability or that the liability has otherwise ceased to exist, without bringing on record any material evidence to the contrary

UniDeritend Limited vs. ACIT (ITAT Mumbai)

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DATE: November 26, 2015 (Date of pronouncement)
DATE: January 29, 2016 (Date of publication)
AY: 2008-09
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CITATION:
Subsidy granted to set up a wind project is a capital receipt. the subsidy cannot be reduced under Explanation 10 to s. 43(1) from the cost of the assets acquired though 100% depreciation is allowed on the cost of the assets. The subsidy is also not assessable either u/s 41(1) or u/s 50

So far as the contention of the AO that the subsidy is liable to be taxed under section 50 of the Act is concerned, we find that in this case neither there was a transfer of any asset from the block nor did the block has ceased to exist. It is not a case of capital gains by way of transfer but it is only a case of capital receipt as observed above as an incentive by the state government to promote the generation of electricity through non conventional sources. In view of the above, in our view, the subsidy received by the assessee is not taxable under section 41(1) neither under section 43(1) and nor under section 50 of the Act

Glen Williams vs. ACIT (ITAT Bangalore)

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 12, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 41(1)/ 68: Old unclaimed liabilites which are not written back by the assessee can neither be assessed as "cash credits" u/s 68 nor assessed u/s 41(1) as "remission or cessation of liability"

On the applicability of section 68, we are of the view that those provisions will not apply as the balances shown in the creditors account do not arise out of any transaction during the previous year relevant to AY 2009-10. The provisions of sec. 68 are clear inasmuch as they refer to “sum found credited in the books of account of an assessee maintained for any previous year”. Since the credit entries in question do not relate to previous year relevant to AY 2009-10, the same cannot be brought to tax u/s. 68 of the Act. The proper course in such cases for the Revenue would be to find out the year in which the credits in question were credited in the books of account and thereafter make an enquiry in that year and make an addition in that year, if other conditions for applicability of section 68 are satisfied

Perfect Paradise Emporium Pvt. Ltd vs. ITO (ITAT Delhi)

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DATE: April 22, 2015 (Date of pronouncement)
DATE: July 27, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 41(1)/ 68: Unclaimed liabilities to creditors, even if fictitious and bogus, cannot be assessed u/s 41(1) in the absence of a write-back. The bogus credits can be assessed u/s 68 only in the year the credits were made and not in the year they are found to be not payable

Applying the ratio in the cases mentioned supra, the amount in question cannot be brought to tax in the year under appeal under the provisions of Section 41(1) of the Act. It is trite law that an addition under Section 68 can be made only in the year in which credit was made to the account of the creditors in the books of account maintained. Admittedly, in this case the credit to the account of creditors was made in the earlier years and therefore, the amount even cannot be brought to tax under Section 68 in the year under appeal. However, it is open to the Department to levy tax on such amount by resorting to the remedies available under the provisions of Act by duly following the procedure known to the law

Natural Gas Company Pvt. Ltd vs. DCIT (ITAT Mumbai)

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DATE: May 22, 2015 (Date of pronouncement)
DATE: June 2, 2015 (Date of publication)
AY: 2007-08
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CITATION:
(i) S. 48: Interest paid on moneys borrowed to acquire assets cannot be treated as the 'cost of acquisition' of the asset, (ii) S. 41(1): Unclaimed liabilities are deemed to have been remitted/ ceased and are taxable in the year of discovery by AO

The interest cost is toward the retention of the borrowing and, concomitantly, the retention or the holding of the asset under reference, i.e., is a function of the holding period. It is, thus, rightly described as a holding cost or a period cost, depending upon how one may look at it. This difference is again of relevance in-as-much as the asset may be sold/realized without the repayment of the debt, so that the interest cost continues independent of the asset. Again, the debt may be repaid/liquidated, extinguishing the interest cost, while the holding of the asset continues. That is, even the holding cost relationship is not automatic or follows as a natural corollary. The two, i.e., the interest cost and cost of the asset, are in any case independent of each other

Bharat Dana Bera vs. ITO (ITAT Mumbai)

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DATE: March 5, 2015 (Date of pronouncement)
DATE: March 16, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 41(1)/68: Failure to establish genuineness of old liabilities means that there is a remission/ cessation of such liabilities

The assessee failed to establish the genuineness of these liabilities by producing supporting evidence. Simply the liabilities being reflected against certain names in the books of account would not establish the genuineness of liabilities

ITO vs. Sajjankumar Didwani (ITAT Mumbai)

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DATE: May 28, 2014 (Date of pronouncement)
DATE: October 26, 2014 (Date of publication)
AY: 2009-10
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CITATION:
S. 41(1): Unclaimed & unproven liabilities are deemed to have ceased and are assessable as income

(i) When the liability continues to subsist year after year, for several years, serious and valid doubts as to its existence or as representing an existing liability, may arise. This is as in the very nature of the events, nobody

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