Law:

Section:

Section 41(1) of the Income-tax Act, 1961 - Remission or cessation of trading liability - Assessment year 1972-73 - Assessee claimed that out of amount refunded to it by Excise Department, only a certain part was liable to be taxed by invoking section 41(1) because balance had not been allowed as deduction in earlier years - Whether assessing authority was required to verify orders of assessment for relevant years and determine profits liable to be taxed under section 41 - Held, yes FACTS During the relevant assessment year the assessee received a sum of Rs.51,400 by way of refund of the "Luxury tax collected in the form of a fee for licence for the vending and stocking of tobacco" which it had paid to the Excise Department during the assessment years beginning from 1952-53 to 1959-60. Out of aforesaid amount, the assessee included only a sum of Rs. 27,838 as profits assessable under section 41(1) as the balance amount had not been allowed as deduction in earlier years. In the absence of the books of account for the earlier years, the ITO rejected the assessee's claim and treated the entire amount assessable under section 41(1). On appeal, the AAC directed the assessee, to produce the books of account of the relevant years and the ITO was directed to bring to tax only such amount as was found to have been debited in the accounts for the payment of the licence fees. On second appeal, the Tribunal held that the onus was on the Department to show that these amounts were claimed as deduction in the earlier years and since said onus had not been discharged, the balance could not be brought to tax under section 41(1). On reference : HELD Section 41(1) enables the revenue to tax as income what it had allowed as a deduction in the earlier years. This receipt, however, can be taxed only in the previous year in which the assessee received it. It should, therefore, be established that the receipt sought to be assessed represented the allowance or deduction granted or the remission or cessation of the trading liability allowed to be deducted in any year prior to the previous year in which the amount was received. The section, however, does not warrant a detailed enquiry…

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