ITO WARD - 13(1), C.R. BUILDING vs. J L G DEVELOPERS LIMITED, JANPATH

ITA 4905/DEL/2024Status: DisposedITAT Delhi12 December 2025AY 2016-17Bench: SHRI ANUBHAV SHARMA, JUDICIAL MEMBER, SHRI NAVEEN CHANDRA (Accountant Member)10 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that Section 41(1) of the Income Tax Act, 1961, is not applicable in this case. For Section 41(1) to apply, there must be a recovery of loss or expenditure, or remission or cessation of a trading liability for which a deduction was previously allowed. In this case, the liability was not a trading liability but a capital liability in the nature of a loan received, used to repay another loan. The assessee had not claimed any deduction or expense in respect of this liability in any prior year, nor had it been written back in the profit and loss account. The liability continued to be reflected as outstanding in the assessee's books. The Tribunal further noted that the creditor company being struck off the register of companies does not automatically extinguish its liabilities, and the assessee's arguments regarding the Companies Act provisions and the subsequent date of striking off were valid. The Tribunal also found no violation of Rule 46A, as the assessee had not filed any additional evidence before the CIT(A). The CIT(A) had correctly distinguished the facts from the case of T.V. Sundram Aiyangar & Sons. Therefore, the appeal by the Revenue was dismissed.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2016-17. The Assessing Officer (AO) made an addition of Rs. 8,22,08,000/- under Section 41(1) of the Income Tax Act, 1961, on account of cessation of liability. The assessee, JLG Developers Ltd., had received this amount from M/s Sethi Housing Private Limited and utilized it for repaying a Bank of India loan. The assessee had not claimed this amount as a trading expense and it was returnable to M/s Sethi Housing Private Limited. The AO considered the liability to have ceased because the creditor company, M/s Sethi Housing Private Limited, was struck off the register of companies. The CIT(A) deleted the addition, leading to the present appeal by the Revenue.

What were the issues?

1. Whether the deletion of the addition of Rs. 8,22,08,000/- made under Section 41(1) of the Income Tax Act, 1961, by the CIT(A) was justified, considering the creditor company was struck off the register of companies? (Question of law and mixed fact and law, turning on Section 41(1)). Assessee's Contentions: - A company being struck off under Section 248 of the Companies Act, 2013, does not amount to winding up, and its liabilities are not extinguished. The right to recover liabilities remains intact, and the company can be restored. - The striking off date (21.07.2017) is subsequent to the relevant Assessment Year 2016-17, thus having no bearing. - No deduction or expense was claimed for this liability, nor was it written back. The liability remained outstanding in the books. - There was no violation of Rule 46A as no additional evidence was filed before the CIT(A). - Relied on various High Court and ITAT decisions including Principal Commissioner of Income-tax v. Soorajmull Nagarmull (SC). Revenue's Contentions: - The CIT(A) erred in ignoring the applicability of Explanation 1 to Section 41(1)(a) of the Act, relying on the case of T.V. Sundram Aiyangar & Sons. - The AO's remand report indicated that the creditor company was dissolved under Section 248(5) of the Companies Act, 2013, hence the liability to return the loan ceased to exist.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 248,Section 248(5),Section 248(8),Section 252(3),Section 143(3),Section 46A

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Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,

Before: SHRI ANUBHAV SHARMA, & SHRI NAVEEN CHANDRA

For Appellant: Shri Tarun Kandhari, CA, Shri Hement Kumar, CA, Ms. Ayushi Mittal, CA
For Respondent: Shri Om Prakash, Sr. DR
Hearing: 03.12.2025Pronounced: 12.12.2025

PER NAVEEN CHANDRA, AM :-

This appeal by the Revenue is directed against the order of the ld. CIT(A), Delhi dated 26.09.2024 pertaining to A.Y 2016-17. 2. The solitary grievance raised by the Revenue pertains to the deletion of addition of Rs. 8,22,08,000/- made u/s 41(1) of the Income- [A.¥ 2016-17] JLG Developers

tax Act, 1961 [the Act, for short] on account of cessation of liability without following the process of admitting additional evidence u/r 46A.

3.

Brief facts of the case are that the assessee received an amount of Rs. 8,22,08,000/- from M/s Sethi Housing Private Limited and the amount has been utilized by the assessee for the purpose

The order continues below.

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