Law:

Section:

Section 41(1) of the Income-tax Act, 1961 [Corresponding to section 10(2A) of Indian Income-tax Act, 1922] - Remission or cessation of trading liability - Assessment year 1958-59 - Assessee-company, who maintained its account on mercantile basis, had been allowed deduction on account of liability of wages, salary and bonus which had become due and payable - A portion of such wages, salary and bonus were not drawn by employees and said sum was carried forward to relevant accounting period and shown in credit side of profit and loss account - ITO included said amount in total income of assessee under section 10(2A) of 1922 Act - Whether transfer of aforesaid amount to credit of profit and loss account was a unilateral act of assessee, who was a debtor to its employees, by his own unilateral act, could not bring about cessation or remission of his liability - Held, yes - Whether assuming that said amount was distributed by company to its shareholders, it could not get rid of its liability when it was called upon to meet it either by employees under Industrial Disputes Act or by Government under Bombay Labour Welfare Funds Act - Held, yes - Whether, therefore, there was no cessation or remission of said liability, therefore, amount in question could not be assessed to tax under section 10(2A) of 1922 Act - Held, yes FACTS The assessee-company maintained its accounts on mercantile basis. On the basis of this system, whenever the company incurred any liability on account of the wages, salary and bonus that became due and payable to its employees, it had claimed allowance or deduction in respect of such trading liability in the various prior years even though the amounts had not been in fact paid to the employees concerned. For this purpose the company had made suitable entries in its account books. In respect of the assessment of these various prior years, the company had claimed deductions in respect of amounts, which had become due and payable by way of salary, wages and bonus to its employees on the ground that the assessee-company had incurred a liability in respect of them. In view of the mercantile system of accounting adopted by the assessee, these deductions…

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