Law:

Section:

Section 41(1) of the Income-tax Act, 1961 - Remission or cessation of trading liability - Where assessee, a shipping agent, used to get refund of amount deposited with Mumbai Port Trust and out of such amounts, assessee offered amounts lying with it for more than three years, Assessing Officer was unjustified in treating entire amount of refund lying with assessee as income under section 41(1) [In favour of assessee] The assessee was a shipping agent providing services to ships and acted as an off-shore representative. During the course of its business, assessee was required to make deposits on behalf of its customers on various accounts with the Mumbai Port Trust. After recovering the charges, Mumbai Port Trust used to refund the amount. The refund amounts lying with the assessee for more than three years were considered by the assessee as its income and offered to tax. The Assessing Officer rejected the method of accounting followed by the assessee and brought the entire refund amount lying with the assessee to tax under section 41(1). Held that there was no infirmity in the method followed by the assessee and, moreover, the balance refund amount had been offered to tax in the subsequent assessment years which the department had accepted. Therefore, the addition was to be deleted. Suresh Kumar for the Appellant. Atul K. Jasani for the Respondent. JUDGMENT 1. Whether the Income-tax Appellate Tribunal was justified in deleting the addition made under section 41(1) of the Income-tax Act, 1961, is the…

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