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“Section 41(1)”

Section References (mined)Section 41Section 41(1)883 judgments

The decision most relied on for Section 41(1) is Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (227 ITR 172), cited in 621 judgments on BharatTax.

Leading authorities on Section 41(1)

Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT
227 ITR 172 · 1997 · Supreme Court
621
citing judgments

Interest income earned on deposits, particularly before the commencement of business operations or as a requirement for business licensing, is taxable as "income from other sources" under Section 56, and cannot be treated as business income or set off against interest on borrowed funds.

CIT v. T.V. Sundaram Iyengar & Sons Ltd.
222 ITR 344 · 1996 · Supreme Court
223
citing judgments

Unclaimed deposits received in the course of trading transactions and sundry credit balances written back are taxable as business income under Section 41(1) of the Income-tax Act, 1961, as they constitute a cessation of trading liability.

CIT v. Indo Nippon Chemicals Co. Ltd.
261 ITR 275 · 2003 · Supreme Court
204
citing judgments

A liability recognized in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India (ICAI) is an allowable expense for income tax purposes.

CIT v. Sugauli Sugar Works (P) Ltd.
236 ITR 518 · 1999 · Supreme Court
203
citing judgments

For the purpose of Section 41(1) of the Income-tax Act, a liability is considered to have ceased only when the creditor actively releases or writes off the amount, or when the liability ceases to exist in the assessee's books; mere expiry of the limitation period for recovery does not constitute cessation of liability.

CIT v. Mahindra & Mahindra Ltd.
404 ITR 1 · 2018 · Supreme Court
164
citing judgments

The waiver of a loan taken for acquiring capital assets is considered a capital receipt and is not taxable as income under Section 28(iv) of the Income Tax Act. The ruling distinguishes between the waiver of trading liabilities and capital liabilities for tax purposes.

Mahindra & Mahindra Ltd. v. CIT
261 ITR 501 · 2003 · High Court
147
citing judgments

Section 41(1) of the Income-tax Act cannot be invoked if the assessee has not been granted a deduction for the relevant liability in earlier years.

Prakash Cotton Mills Pvt. Ltd. v. CIT
201 ITR 684 · 1993 · Supreme Court
133
citing judgments

Compensatory interest or damages paid for a breach of contract, arising in the normal course of business, are allowable as a deduction under section 37(1) as wholly and exclusively incurred for business purposes. This principle extends to indirect taxes paid in the course of business, which are admissible as business expenditure.

CIT v. Oswal Agro Mills Ltd.
341 ITR 467 · 2012 · High Court
108
citing judgments

The Legislature abolished terminal depreciation under section 32(1)(iii) and the taxing of balancing charge under section 41(2), replacing these provisions with the requirement to reduce sale proceeds of depreciable assets from the block of assets.

Judgments citing Section 41(1)

Sunita Khandelwal, Mumbai vs. PCIT (Central)-1, Mumbai

In the result, the grounds of appeal raised by the assessee are allowed

ITA 3540/MUM/2025[2018-19]Status: DisposedITAT Mumbai23 Dec 2025AY 2018-19

Bench: Shri Saktijit Dey & Shri Jagadish

For Appellant: Shri Ajay R. Singh &For Respondent: Shri Arun Kanti Datta – CIT(DR)
Section 132Section 142(1)Section 143(3)Section 153CSection 263

there was difference in amount of opening/closing balance of liabilities shown as compared to total liabilities which ought to have been disallowed under section 41(1) and, thus, order passed by Assessing Officer was erroneous and prejudicial to interest of revenue, since Assessing Officer after applying his mind and making

Sunita Khandelwal, Mumbai vs. PCIT(Central)-1, Mumbai

In the result, the grounds of appeal raised by the assessee are allowed

ITA 3539/MUM/2025[2016-17]Status: DisposedITAT Mumbai23 Dec 2025AY 2016-17

Bench: Shri Saktijit Dey & Shri Jagadish

For Appellant: Shri Ajay R. Singh &For Respondent: Shri Arun Kanti Datta – CIT(DR)
Section 132Section 142(1)Section 143(3)Section 153CSection 263

there was difference in amount of opening/closing balance of liabilities shown as compared to total liabilities which ought to have been disallowed under section 41(1) and, thus, order passed by Assessing Officer was erroneous and prejudicial to interest of revenue, since Assessing Officer after applying his mind and making

Sunita Khandelwal, Mumbai vs. PCIT(Central)-1, Mumbai

In the result, the grounds of appeal raised by the assessee are allowed

ITA 3451/MUM/2025[2015-16]Status: DisposedITAT Mumbai23 Dec 2025AY 2015-16

Bench: Shri Saktijit Dey & Shri Jagadish

For Appellant: Shri Ajay R. Singh &For Respondent: Shri Arun Kanti Datta – CIT(DR)
Section 132Section 142(1)Section 143(3)Section 153CSection 263

there was difference in amount of opening/closing balance of liabilities shown as compared to total liabilities which ought to have been disallowed under section 41(1) and, thus, order passed by Assessing Officer was erroneous and prejudicial to interest of revenue, since Assessing Officer after applying his mind and making

Vikunj Real Estate Private Limited, Delhi vs. Income Tax Officer, Delhi

In the result, the appeal filed by the assessee is dismissed

ITA 3179/DEL/2025[2011-12]Status: DisposedITAT Delhi22 Dec 2025AY 2011-12

Bench: SHRI SATBEER SINGH GODARA (Judicial Member), SHRI S. RIFAUR RAHMAN (Accountant Member)

For Appellant: Shri Shyam Sunder Mangla, CAFor Respondent: Shri Dayainder Singh Sidhu, CIT DR
Section 143Section 143(3)Section 148Section 263Section 41(1)

there was difference in amount of opening/closing balance of liabilities shown as compared to total liabilities which ought to Have been disallowed under section 41(1) and, thus, order passed by Assessing Officer was erroneous and prejudicial to interest of revenue, since Assessing Officer after applying his mind and making

Cowtown Infotech Services Ltd, Mumbai vs. DCIT, Central-7(3), Mumbai

In the result, Assessee‟s appeal is allowed for statistical purposes

ITA 5845/MUM/2025[2014-15]Status: DisposedITAT Mumbai18 Dec 2025AY 2014-15

Bench: Shri Narender Kumar Choudhry & Shri Bijayananda Prusethassessment Year : 2014-15 Cowtown Infotech Services Deputy Commissioner Limited, Of (As Successor On Amalgamation To Vs. Income Tax, Futuretech Constructions & Precast Central Circle-7(3), Room No. 655, 6Th Floor, Private Limited), 412, Floor-4, Aayakarbhavan, 17G Vardhaman Chamber, Maharshikarve Road, Cawasji Patel Road, Mumbai-400020. Horniman Circle, Fort, Mumbai-400001. Pan : Aaacc4889L (Appellant) (Respondent)

For Appellant: Shri Niraj Sheth, Ld. ARFor Respondent: Shri Virabhadra S.Mahajan, Ld. Sr.DR
Section 143(3)Section 250Section 40A(7)Section 41(1)Section 43B

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “C” BENCH : MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER AND SHRI BIJAYANANDA

M/S. Devisha Infrastructure Pvt Ltd, Mumbai vs. ITO Ward 6(2)(2), Mumbai

In the result, appeal of the assessee ITA No

ITA 5782/MUM/2025[2017-18]Status: DisposedITAT Mumbai17 Dec 2025AY 2017-18

Bench: Shri Anikesh Banerjee & Shri Prabhash Shankar

For Appellant: Shri Nishit GandhiFor Respondent: Shri Umashankar Prasad (SR DR)
Section 143(3)Section 147Section 148Section 148ASection 151Section 250Section 282ASection 41(1)

without understanding the fact that, said amount was not trading liability and was never debited to Profit & Loss account and thus provisions of section 41(1) of the I. T. Act, 1961 are not applicable for the said transaction. 5. On the facts and circumstances of the case ... standing in the books of the assessee towards M/s Blue Circle Infratech can be treated as cessation of liability under section 41(1) of the Act. It is an undisputed fact that the assessee continues to reflect the said amount as a trade payable in its books of account

M/S. Devisha Infrastructure Pvt Ltd, Mumbai vs. ITO Ward 6(2)(2), Mumbai

In the result, appeal of the assessee ITA No

ITA 5781/MUM/2025[2019-20]Status: DisposedITAT Mumbai17 Dec 2025AY 2019-20

Bench: Shri Anikesh Banerjee & Shri Prabhash Shankar

For Appellant: Shri Nishit GandhiFor Respondent: Shri Umashankar Prasad (SR DR)
Section 143(3)Section 147Section 148Section 148ASection 151Section 250Section 282ASection 41(1)

without understanding the fact that, said amount was not trading liability and was never debited to Profit & Loss account and thus provisions of section 41(1) of the I. T. Act, 1961 are not applicable for the said transaction. 5. On the facts and circumstances of the case ... standing in the books of the assessee towards M/s Blue Circle Infratech can be treated as cessation of liability under section 41(1) of the Act. It is an undisputed fact that the assessee continues to reflect the said amount as a trade payable in its books of account

Avon Cycles Limited, G.T Road, Dhandari Kalan, Ludhiana vs. Pr. Commissioner of Income Tax, 1, Rishi Nagar, Ludhiana

In the result, the appeal of the assessee is partly allowed

ITA 705/CHANDI/2025[2021-22]Status: DisposedITAT Chandigarh15 Dec 2025AY 2021-22

Bench: Shri Laliet Kumar & Shri Krinwant Sahayआयकर अपील सं/. Ita No. 705/Chd/2025 िनधा"रणवष" / Assessment Year: 2021-22 Avon Cycles Ltd., Vs The Pcit-I, G.T.Road, Dhandari Kalan, Rishi Nagar, Ludhiana. Ludhiana. "थायीलेखासं/.Pan No: Aabca4140R अपीलाथ"/Appellant ""यथ"/Respondent Assessee By : Shri Ashish Aggarwal, Ca Revenue By : Shri Manav Bansal, Cit, Dr Date Of Hearing : 09.12.2025 Date Of Pronouncement : 15/12/2025 Physical Hearing Order Per Laliet Kumar, Jm This Appeal Filed By The Assessee Is Directed Against The Order Of The Principal Commissioner Of Income Tax, Ludhiana-1 (Hereinafter Referred To As The "Pcit"), Dated 27.03.2025, Passed Under Section 263 Of The Income Tax Act, 1961 (The "Act") For The Assessment Year 2021-22. 2. The Assessee Has Raised The Following Substantive Grounds Of Appeal: “1. That Ld. Pcit -1, Ludhiana, Erred In Law & On Facts In Assuming The Jurisdiction To Invoke The Provisions Of Section 263 Of The Act To Set Aside The Order Passed By The Assessing Officer (National Faceless Assessment Centre, Delhi) When The Order Was Neither Erroneous Nor Prejudicial To The Interest Of Revenue. The Order Passed By Ld. Pcit(1), Ludhiana, Being Illegal Unjustified & Against The Provisions Of Section 263 May Be Annulled. 2. That Ld. Pcit (1) Erred In Law & On Facts In Setting Aside The Order Of Assessing Officer (National Faceless Assessment Centre, Delhi) By Applying The Different Approach On The Same Set Of Facts On The Issues Already Considered By The Assessing Officer.

For Appellant: Shri Ashish Aggarwal, CAFor Respondent: Shri Manav Bansal, CIT, DR
Section 143(3)Section 194JSection 263Section 69C

आयकर अपीलीय अिधकरण च"डीगढ़ "यायपीठ च"डीगढ़ , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘A’ CHANDIGARH BEFORE SHRI

Bharti Telemedia Limited, New Delhi vs. DCIT, Circle-4(2), New Delhi

In the result, the appeals of the Assessee are allowed and appeals of the Revenue are dismissed

ITA 624/DEL/2024[2021-22]Status: DisposedITAT Delhi12 Dec 2025AY 2021-22

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 35ASection 4

assessee, the same shall be offered to tax in the year of cessation of such liability in terms of provisions of section 41(1) of the Act. 53. In view of the aforesaid, the disallowance of provision for interest made by the assessing officer treating the same as unascertained liability

DCIT, Circle 4(2), New Delhi vs. M/S Bharti Telemedia Ltd, New Delhi

In the result, the appeals of the Assessee are allowed and appeals of the Revenue are dismissed

ITA 4966/DEL/2024[2020-21]Status: DisposedITAT Delhi12 Dec 2025AY 2020-21

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 35ASection 4

assessee, the same shall be offered to tax in the year of cessation of such liability in terms of provisions of section 41(1) of the Act. 53. In view of the aforesaid, the disallowance of provision for interest made by the assessing officer treating the same as unascertained liability

Bharti Telemedia Limited, New Delhi vs. DCIT, Circle-4(2), New Delhi

In the result, the appeals of the Assessee are allowed and appeals of the Revenue are dismissed

ITA 4960/DEL/2024[2020-21]Status: DisposedITAT Delhi12 Dec 2025AY 2020-21

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 35ASection 4

assessee, the same shall be offered to tax in the year of cessation of such liability in terms of provisions of section 41(1) of the Act. 53. In view of the aforesaid, the disallowance of provision for interest made by the assessing officer treating the same as unascertained liability

ITO Ward - 13(1), C.R. Building vs. J L G Developers Limited, Janpath

In the result, appeal of Revenue in ITA No

ITA 4905/DEL/2024[2016-17]Status: DisposedITAT Delhi12 Dec 2025AY 2016-17

Bench: Shri Anubhav Sharma & Shri Naveen Chandra

For Appellant: Shri Tarun Kandhari, CAFor Respondent: Shri Om Prakash, Sr. DR
Section 143(3)Section 248Section 248(5)Section 252(3)Section 41(1)Section 41(1)(a)

counsel for the Revenue vehemently submitted that the ld. CIT(A) was not justified in ignoring the applicability of Explanation 1 of Section 41(1)(a) of the Act as mentioned in the case of T V Sundram Aiyangar & Sons 222 ITR 344. The ld. DR relied upon the findings ... that sub-section by way of writing off such liability in his accounts in his accounts” In order to apply the provisions of section 41(1) in the instant case, we have to examine the relevant facts vis a vis the law. Firstly, there should be a recovery

DCIT, Circle 4(2), New Delhi vs. Ms Bharti Telemedia Ltd, New Delhi

In the result, the appeals of the Assessee are allowed and appeals of the Revenue are dismissed

ITA 4868/DEL/2024[2016-17]Status: DisposedITAT Delhi12 Dec 2025AY 2016-17

Bench: Shri C.N. Prasad & Shri M. Balaganesh

Section 35ASection 4

assessee, the same shall be offered to tax in the year of cessation of such liability in terms of provisions of section 41(1) of the Act. 53. In view of the aforesaid, the disallowance of provision for interest made by the assessing officer treating the same as unascertained liability

Madhushree Enterprises, Kampli, Hospet vs. DCIT, Bengaluru

In the result, the appeal filed by the assessee is dismissed

ITA 697/BANG/2024[2011-12]Status: DisposedITAT Bangalore11 Dec 2025AY 2011-12

Bench: Shri Prashant Maharishi, Vice – & Shri Soundararajan K.Assessment Year : 2011-12

For Appellant: NoneFor Respondent: Shri Muthu Shankar, CIT-DR
Section 142(1)Section 143(2)Section 144Section 148Section 276CSection 37(1)Section 41(1)

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL

Vodafone West Limited, (Formerly Known As Vodafone Essar Gujarat Limited), Ahmedabad vs. The Dy.CIT, Circle-4(1)(2), Ahmedabad

In the result, the appeal by the Revenue is partly allowed for statistical

ITA 671/AHD/2015[2010-11]Status: DisposedITAT Mumbai11 Dec 2025AY 2010-11

Bench: Shri Vikram Singh Yadavshri Sandeep Singh Karhail

For Appellant: Shri K.K. VedFor Respondent: Shri Pankaj Kumar, CIT-DR
Section 142Section 143(2)Section 143(3)Section 144CSection 144C(5)Section 45Section 47Section 48Section 50D

extent in those years, therefore, the recovery of the bad debts in the year under consideration is taxable as per the provisions of section 41(1) of the Act and the accordingly is eligible for deduction under section 80-IA of the Act. The AO, vide draft assessment order, disagreed

The Dy CIT, Circle-4(1)(2), Ahmedabad vs. Vodafone West Limited, Ahmedabad

In the result, the appeal by the Revenue is partly allowed for statistical

ITA 1634/AHD/2015[2010-11]Status: DisposedITAT Mumbai11 Dec 2025AY 2010-11

Bench: Shri Vikram Singh Yadavshri Sandeep Singh Karhail

For Appellant: Shri K.K. VedFor Respondent: Shri Pankaj Kumar, CIT-DR
Section 142Section 143(2)Section 143(3)Section 144CSection 144C(5)Section 45Section 47Section 48Section 50D

extent in those years, therefore, the recovery of the bad debts in the year under consideration is taxable as per the provisions of section 41(1) of the Act and the accordingly is eligible for deduction under section 80-IA of the Act. The AO, vide draft assessment order, disagreed

Deputy Commissioner of Income Tax, Aurangabad vs. Dhananjay Babruvan Kender, Beed

In the result, the appeal filed by the Revenue is allowed for statistical purposes

ITA 1032/PUN/2024[2019-20]Status: DisposedITAT Pune09 Dec 2025AY 2019-20

Bench: Shri R. K. Panda & Ms. Astha Chandraassessment Year : 2019-20 Dcit, Aurangabad Dhananjay Babruvan Kender Bunglow No.69, Yogeshwari Nagari Vs. Ring Road, Ambajogai, Beed – 431517 Pan: Bwlpk1384D (Appellant) (Respondent) Assessee By : Shri Hari Krishan Department By : Shri Amol Khairnar, Cit-Dr Date Of Hearing : 27-11-2025 Date Of Pronouncement : 09-12-2025 O R D E R Per R.K. Panda, Vp:

For Appellant: Shri Hari KrishanFor Respondent: Shri Amol Khairnar, CIT-DR
Section 132Section 133ASection 142(1)Section 153ASection 69Section 69C

under section 43B and later got refund by virtue of exemption allowed in appeal, amount of turnover tax was to be assessed under section 41(1) in year in which refund was received. Since the payment in the instant case should only entail the assessee extra expenditure and would

Elcome Technologies Private Limited, Mumbai vs. Dy. Commissioner of Income Tax, Mumbai

Appeal of the assessee is partly allowed

ITA 6188/MUM/2025[2018-19]Status: DisposedITAT Mumbai09 Dec 2025AY 2018-19

Bench: Shri Saktijit Dey, Vp & Ms Padmavathy S, Am

For Respondent: Shri Himanshu Joshi, Sr.-DR
Section 250Section 250(4)Section 37Section 41(1)

received till date from CSIR. Even otherwise, if any amount would have been received, the Appellant would have offered to tax under section 41(1) of the Act. 3. The CIT(A) erred in not directing the AO to allow the write off for bad debts

Sivendra Singh Chauhan, Kannauj vs. Assistant Commissioner of Income Tax, Farrukhabad

In the result, the appeal of the assessee is allowed for statistical purposes

ITA 100/AGR/2025[2017-2018]Status: DisposedITAT Agra04 Dec 2025AY 2017-2018

Bench: Shri M. Balaganesh & Shri Sunil Kumar Singh(Through Virtual Hearing) Shivendra Singh Chauhan, Vs. Acit, 1, Durga Naga Tirwa, Circle-4(2)(1), Kannauj- 209732 Farrukhabad (Appellant) (Respondent) Pan: Agvpc5211C

For Appellant: Shri Anurag Singh, AdvFor Respondent: Shri Sukesh Kumar Jain, CIT(DR)
Section 144Section 145(3)Section 250Section 41(1)Section 68

Further the Learned AO made an addition of Rs 1,08,13,700/- on account of cessation of liability in terms of section 41(1) of the Act. The action of the Learned AO had been upheld by the Learned CITA. 4. Before us, the Learned AR prayed

The Satara Zilla Krishi Bank Karmachari Sahakari Patsanstha Ltd, Satara vs. ACIT, Satara, Cir-Satara

In the result, the appeal of the assessee is allowed for statistical

ITA 2156/PUN/2025[2020-21]Status: DisposedITAT Pune28 Nov 2025AY 2020-21

Bench: Shri R.K. Panda & Ms. Astha Chandraआयकर अपील सं. / Ita Nos.2155 & 2156/Pun/2025 निर्धारण वर्ष / Assessment Year : 2020-21 The Satara Zilla Krishi Bank Karmachari Sahakari Patsanstha Ltd., Ajinkya Complex, 512, Ch. Shivaji Road, Camp, Sadar Bazar, Satara-415001 Asst. Commissioner Of Income Tax, Satara Circle, Vs. Satara Pan: Aaaat1502B अपीलार्थी / Appellant प्रत्यर्थी / Respondent Assessee By : Department By : Date Of Hearing : Date Of Pronouncement : Ms. Renuka Arunrao Ghatge Shri S. Sadananda Singh 11-11-2025 28-11-2025 आदेश / Order Per Astha Chandra, Jm : The Above Two Appeals Filed By The Assessee Are Directed Against The Separate Orders Both Dated 15.07.2025 Of The Ld. Commissioner Of Income Tax (Appeals)/Nfac, Delhi [“Cit(A)”/“Nfac"] Pertaining To Assessment Year (“Ay") 2020-21. For The Sake Of Convenience, Both These Appeals Were Heard Together & Are Being Disposed Of By This Common Order.

For Appellant: Department byFor Respondent: Date of hearing
Section 139(1)Section 143(2)Section 144Section 41(1)Section 80PSection 80P(2)Section 80P(2)(a)Section 80P(2)(b)Section 80P(2)(d)

आयकर अपीलीय अधिकरण “बी” न्यायपीठ पुणे में । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, PUNE BEFORE SHRI R.K. PANDA