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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM & Shri M.Balaganesh, AM ]
This assessee’s appeal for assessment year 2012-13 arises from the Commissioner of Income Tax (Appeals)-19, Kolkata’s order passed in case No.21/CIT(A)-19/W- 11(2)/Kol/2016-17 involving proceedings under section 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.
The assessee’s sole substantive grievance raised in the instant appeal challenges correctness of both the lower authorities’ action making cessation of liability addition of Rs. 99,66,900/- u/s 41(1)(a)of the Act. We come to the relevant facts. This assessee is an NBFC. It emerges from assessment order dated 28.03.2015 that the Assessing Officer came across its details of loan and settlement accounts indicating balance of M/s
M/s Alosha Vanijya Pvt. Ltd. A.Yr. 2012-13 Religare Finvest Ltd as on 31.03.2011 as per assessee’s books to be at Rs. 4,24,64,304/- ; its balances of the other party’s books to be at Rs. 9,42,19,917/-, settlement amount vide deed of settlement dated 03.04.2011 of Rs. 3,25,00,000/- and balance written off by Alosha Vanijya Pvt. Ltd. (assessee) to capital reserve account, to the tune of Rs. 99,64,604/-; respectively. There is no detailed discussion in the assessment order as the Assessing Officer has merely quoted section 41(1) of the Act to make the impugned addition of Rs. 99,64,604/- as an instance of cessation of liability. The CIT(A) has confirmed this addition in lower appellate order running into 19 pages. The CIT(A) observed in page 18 that the assessee had failed to prove the money in question to have been utilized for capital purposes. He holds that the sum in issue had become used for business purposes. Its interest had been debited in assessment year 2008-09 and therefore it was utilized for business purposes only. This leaves the assessee aggrieved.
We have given our thoughtful consideration to rival contentions. There can be no dispute about the settled legal position as per section 41(1) of the Act that it is applicable in case an assessee obtains any cash or in any other amount, in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. The key takeaway herein is that the benefit in issue must arise from remission or cessation of a trading liability. The Assessing Officer is himself very clear that the assessee had written off the balance in issue amounting to Rs. 99,64,604/- in capital reserve account instead of trading account. The same prima facie indicates that this amount never formed part of any trading liability. Mr. Chowdhury vehemently contends during the course of hearing that the assessee had utilized the same for its business purposes in assessment year 2008-09. We find no reason to accept the instant argument. Firstly it goes contrary to assessee’s books of accounts treating the same in question to be in capital account. Further there is no material to come to the conclusion that the assessee had debited/claimed on the same as its business expenditure in any of the preceding assessment years. Case law in PCIT vs. Tinna Finex Limited 2
M/s Alosha Vanijya Pvt. Ltd. A.Yr. 2012-13 dated 15.02.2016 & CIT vs. Shivali Blocks Pvt. Ltd. 355 ITR 218 (Del) hold that Section 41(1) of the Act is attracted only in case the write off or cessation in issue finds place in profit and loss account. Hon’ble apex court’s latest constitutional bench’s decision in CIT vs. M/s Dilip Kumar & Company & Ors holds that it is the Revenue’s burden to prove application of the taxing provision in given facts and circumstances of the case. It has failed to discharge the same is proving the assessee’s books to have ever claimed the impugned sum as a trading liability in earlier assessment years. We delete the impugned section 41(1) addition therefore.
This assessee’s appeal is allowed.
Order pronounced in the Court on 14.09.2018