Law:

Section:

Section 41(1) of the Income-tax Act, 1961 [Corresponding to section 10(2A) of the Indian Income-tax Act, 1922] - Remission or cessation of trading liability - Assessment year 1956-57 - In course of its business, assessee had dealings with a large number of parties - Various amounts became due to those parties in respect of trading transactions of assessee and in cases where those amounts were not claimed within three years of their becoming due, assessee transferred them to an account called "unclaimed balances account" - There was a debit to this unclaimed balances account to tune of Rs. 65,581 which represented total of certain items in said account - That amount was transferred to reserve for taxation account - Whether since transfer of amounts to unclaimed balances account did not stand in way of assessee making payments therefrom to extent found necessary and, infact, had effected some payments out of that account, as had when claimed by parties, sum of Rs. 65,881 could not be taxed by applying section 10(2A) - Held, yes FACTS In respect of the trading transactions of the assessee-company, various amounts became due to certain parties, and in cases where those amounts were not claimed within three years of their becoming due, the assessee transferred them to an account called the "unclaimed balances account". Some payments were, however, effected out of that account, as and when claimed by the parties. During the financial year which ended on 31-3-1956, there was a debit to this unclaimed balances account to the tune of Rs. 65,881 which represented the total of certain items in the said account. That amount was transferred to the reserve for taxation account. The ITO held that inasmuch as the liability under the unclaimed balances account was reduced to the extent of Rs. 65,881 and the reserves of the assessee were accumulated in the relevant year, the provisions of section 10(2A) of the 1922 Act became applicable and hence, he added the sum of Rs. 65,881 to the total income of the assessee. On appeal, the AAC held that the amount could not be so taxed because the amount would accrue as a benefit to the assessee only when the debts became unenforceable,…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492