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“remission or cessation of liability”

Business IncomeSection 41(1)Section 41(1)78 judgments

The decision most relied on for remission or cessation of liability is CIT v. Sugauli Sugar Works (P) Ltd. (236 ITR 518), cited in 203 judgments on BharatTax.

Leading authorities on remission or cessation of liability

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.

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.

CIT v. Shri Vardhman Overseas Ltd.
343 ITR 408 · 2012 · High Court
76
citing judgments

An addition under Section 68 cannot be made for genuine sundry creditors or trade payables merely carried forward from previous assessment years if there is no fresh credit in the relevant assessment year. Section 41(1) does not apply to acknowledged outstanding liabilities without actual remission or cessation.

Solid Containers Ltd. v. DCIT
308 ITR 417 · 2009 · High Court
74
citing judgments

The write-back or waiver of a loan obtained for business purposes constitutes taxable business income under Section 28. This applies even if no prior deduction was claimed, thereby not attracting Section 41(1).

Chief CIT v. Kesaria Tea Company Limited
254 ITR 434 · 2002 · Supreme Court
59
citing judgments

For Section 41(1) of the Income Tax Act to apply, the mere expiry of the limitation period does not constitute cessation of liability; there must be an explicit act by the creditor, such as a release or admission of write-off, confirming that the liability has ceased without the possibility of revival.

J.K. Chemicals Ltd. v. CIT
62 ITR 34 · 1966 · High Court
48
citing judgments

A debtor cannot unilaterally bring about a cessation or remission of liability for tax purposes; such an event requires a bilateral act, the creditor's acceptance of refusal, or other specific conditions like the debt becoming legally unenforceable coupled with the debtor's stated intention not to honour it.

CIT v. Bhogilal Ramjibhai Atara
43 Taxmann.com 55 · 2014 · High Court
43
citing judgments

Section 41(1) of the Income Tax Act applies only where there is remission or cessation of a trading liability during the previous year relevant to the assessment year, and not merely because the assessee cannot provide confirmations for sundry creditors.

CIT v. Sita Devi Juneja
325 ITR 593 · 2010 · High Court
39
citing judgments

A liability cannot be presumed to have ceased to exist merely because it has been outstanding for several years. Without a bilateral act between the assessee and the creditor indicating cessation, additions under section 41(1) are not permissible.

Judgments citing remission or cessation of liability

Kabel Metal Power Cables Ltd, Thane vs. Dy. Commissioner of Income Tax, Circle-5(2)(1), Mumbai

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

ITA 5299/MUM/2025[2017-18]Status: DisposedITAT Mumbai10 Mar 2026AY 2017-18

Bench: Shri Anikesh Banerjee & Shri Girish Agrawalassessment Year: 2017-18

For Appellant: Shri Prakash Jhujhunwala, CAFor Respondent: Shri Hemanshu Joshi, SR DR
Section 115BSection 144Section 154Section 41(1)Section 69C

basis rather than making addition in respect of identified creditors for their 4 Kabel Metal Power Cables Ltd. AY 2017-18 remission or cessation of liability. Another addition made by the ld. Assessing Officer is on account of unexplained expenditure u/s. 69C for which ld. Assessing Officer noted from

ACIT, CC 6(2), Mumbai vs. Overseas Infrastructure Alliance (India) Private Limited, Mumbai

In the result, appeal by the assessee is allowed

ITA 4321/MUM/2025[2016-17]Status: DisposedITAT Mumbai20 Feb 2026AY 2016-17

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

ACIT, CC 6(2), Mumbai vs. Overseas Infrastructure Alliance (India) Private Limited, Mumbai

In the result, appeal by the assessee is allowed

ITA 4320/MUM/2025[2020-21]Status: DisposedITAT Mumbai20 Feb 2026AY 2020-21

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

ACIT, CC 6(2), Mumbai vs. Overseas Infrastructure Alliance (India) Private Limited, Mumbai

In the result, appeal by the assessee is allowed

ITA 4319/MUM/2025[2019-20]Status: DisposedITAT Mumbai20 Feb 2026AY 2019-20

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

ACIT, CC-6(2), Mumbai vs. Overseas Infrastructure Alliance (India) Private Limited, Mumbai

In the result, appeal by the assessee is allowed

ITA 4318/MUM/2025[2022-23]Status: DisposedITAT Mumbai20 Feb 2026AY 2022-23

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

ACIT, CC 6(2), Mumbai vs. Overseas Infrastructure Alliance (India) Private Limited, Mumbai

In the result, appeal by the assessee is allowed

ITA 4090/MUM/2025[2016-17]Status: DisposedITAT Mumbai20 Feb 2026AY 2016-17

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari andFor Respondent: Shri R. A. Dhyani, CIT DR and
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

Overseas Infrastructure Alliance(India) Private Limited, Mumbai vs. Assistant Commissioner of Income Tax Central Circle 6(2), Mumbai

In the result, appeal by the assessee is allowed

ITA 4064/MUM/2025[2022-23]Status: DisposedITAT Mumbai20 Feb 2026AY 2022-23

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari andFor Respondent: Shri R. A. Dhyani, CIT DR and
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

Overseas Infrastructure Alliance(India) Private Limited, Mumbai vs. Assistant Commissioner of Income Tax, Central Circle -6, Mumbai

In the result, appeal by the assessee is allowed

ITA 4045/MUM/2025[2020-21]Status: DisposedITAT Mumbai20 Feb 2026AY 2020-21

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

Overseas Infrastructure Alliance (India) Private Limtied, Mumbai vs. Assistant Commissioner of Income Tax Central Circle 6(2), Mumbai

In the result, appeal by the assessee is allowed

ITA 4044/MUM/2025[2021-22]Status: DisposedITAT Mumbai20 Feb 2026AY 2021-22

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

Overseas Infrastructure Alliance (India) Private Limtied, Mumbai vs. Assistant Commissioner of Income Tax Central Circle 6(2), Mumbai

In the result, appeal by the assessee is allowed

ITA 4043/MUM/2025[2019-20]Status: DisposedITAT Mumbai20 Feb 2026AY 2019-20

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

ACIT CC 6(2), Mumbai vs. Overseas Infrastructure Alliance (India) Private Limited, Mumbai

In the result, appeal by the assessee is allowed

ITA 3998/MUM/2025[2017-18]Status: DisposedITAT Mumbai20 Feb 2026AY 2017-18

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

ACIT, CC-6(2), Mumbai vs. Overseas Infrastructure Alliance (India) Private Limited, Mumbai

In the result, appeal by the assessee is allowed

ITA 3995/MUM/2025[2011-12]Status: DisposedITAT Mumbai20 Feb 2026AY 2011-12

Bench: Shri Sandeep Gosain & Shri Girish Agrawal

For Appellant: Shri Harsh Kothari and Shri Ronak Vasavada, CAsFor Respondent: Shri R. A. Dhyani, CIT DR and Shri Virabhadra S. Mahajan, Sr. DR
Section 1

Assessing Officer cannot be upheld to consider such liability as income for year under consideration without there being any remission or cessation of liability, more importantly when the liability has been reversed by the assessee in its books of accounts in the subsequent year. Accordingly, we do not find

Hassan Power Supply Campany Limited, Bengaluru vs. DCIT, Central Circle-2(1), Bangalore

In the result, Appeal filed by the Assessee is partly allowed

ITA 2181/BANG/2025[2017-18]Status: DisposedITAT Bangalore06 Feb 2026AY 2017-18

Bench: Shri Prashant Maharishi, Vice – & Shri Keshav Dubeyassessment Year : 2017-18 M/S. Hassan Power Supply Company Ltd., The Deputy Commissioner No. 17, Sankey Road, Of Income Tax, Bengaluru, Central Circle-2(1), Vs. Karnataka – 560 020. Bengaluru. Pan: Aaach4163J Appellant Respondent

For Appellant: Shri H. Siva prasad Reddy, ITP
Section 132Section 143(2)Section 143(3)Section 41Section 41(1)

provisions of section 41(1) of the Act, we find that the income is chargeable to tax only when there is a remission or cessation of liability. Here the liability is disclosed in the books of accounts, and it is subsisting. Therefore, we do not find that the provisions

Harshad Himmatlal Rupani, Pune vs. ITO Ward 5(2), Pune

In the result the ground number 3 is allowed for Statistical

ITA 920/PUN/2025[2014-15]Status: DisposedITAT Pune28 Jan 2026AY 2014-15

Bench: Dr.Dipak P. Ripote & Shri Vinay Bhamoreआयकर अपऩल सं. / Ita No.920/Pun/2025 निर्धारण वषा / Assessment Year: 2014-15 Harshad Himmatlal Rupani, V The Income Tax Officer, 101/102, Ashoka Building, S Ward-5(1), Pune. Green Valley Housing Society, Wanwadi, Pune – 411040. Pan: Adopr6163Q Appellant/ Assessee Respondent / Revenue Assessee By Shri Mahavir Jain Revenue By Smt Neha Thakur – (Virtual) Date Of Hearing 21/01/2026 Date Of Pronouncement 28/01/2026 आदेश/ Order Per Dr. Dipak P. Ripote, Am: This Appeal Filed By The Assessee Is Against The Order Of Ld.Commissioner Of Income Tax(Appeal)[Nfac], Passed Under Section 250 Of The Income Tax Act, 1961 For A.Y.2014-15 Dated 26.08.2024 Emanating From The Assessment Order Passed Under Section 143(3) Of The Income Tax Act, 1961, Dated 22.11.2016. The Assessee Has Raised The Following Grounds Of Appeal :

Section 143(3)Section 250Section 41(1)

1961cannot be made to consider such liability as income of the year under consideration without there being any remission or cessation of liability.”Unquote. 11 ITA No.920/PUN/2025 [A] 6.7) Hon’ble Supreme Court in the case of CIT Vs. Sugauli Sugar Works

Efkon India Private Limited (Successor of I-Pay Clearing Services Private Limited), Gurugram vs. DCIT, Circle 14(1)(2), Mumbai

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

ITA 5331/MUM/2025[2014-15]Status: DisposedITAT Mumbai13 Jan 2026AY 2014-15

Bench: Shri Vikram Singh Yadav & Ms. Kavitha Rajagopalassessment Year : 2014-15 Efkon India Private Limited Dcit, Circle-14(1)(2), (Successor Of I-Pay Clearing Aayakar Bhavan, Services Private Limited), Vs. Mumbai-400020. 1St Floor, Block B, Vatika Towers, Golf Course Road, Sector 54, Gurugram, Haryana-122002. Pan : Aaaci9818F (Appellant) (Respondent) For Assessee : Ms. Bhumika Majethiya For Revenue : Shri Hemanshu Joshi, Sr.Dr Date Of Hearing : 27-10-2025 Date Of Pronouncement : 13-01-2026 O R D E R Per Vikram Singh Yadav, A.M :

For Appellant: Ms. Bhumika MajethiyaFor Respondent: Shri Hemanshu Joshi, Sr.DR
Section 143(2)Section 143(3)Section 234ASection 234BSection 271(1)(c)Section 41(1)

Appellant's books of accounts and confirmed by Efkon AG and hence Section 41(1) is not applicable in the absence of remission or cessation of liability. 5 erred in not appreciating that following the dispute with ICICI attaining finality, the Appellant has written ... Rajkot-Trib); Further submissions were made on non-applicability of provisions of section 41(1) of the Act in absence of any remission or cessation of liability which is sine qua non for applicability of section 41(1) of the Act and the fact that the assessee has recognized

Associated Projects Infra, Hyderabad vs. DCIT., Central Circle -2(4), Hyderabad

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

ITA 1482/HYD/2025[2020-21]Status: DisposedITAT Hyderabad07 Jan 2026AY 2020-21

Bench: Shri Ravish Sooda N D Shri Madhusudan Sawdiaआ.अपी.सं /Ita No.1482/Hyd/2025 (िनधा"रण वष"/Assessment Year: 2020-21) M/S Associated Projects Vs. Deputy Commissioner Of Infra, Hyderabad Income Tax, Central Pan:Aaofa6125E Circle 2(4), Hyderabad (Appellant) (Respondent) िनधा""रती "ारा/Assessee By: C.As Ev Sri Krishna & Siva Charan राज" व "ारा/Revenue By:: Ms. Helen Ruby Jesindha, Sr. Dr सुनवाई की तारीख/Date Of Hearing: 18/12/2025 घोषणा की तारीख/Pronouncement: 07/01/2026 आदेश/Order Per Madhusudan Sawdia, A.M.:

For Appellant: C.As EV Sri Krishna and Siva CharanFor Respondent: : Ms. Helen Ruby Jesindha, Sr
Section 133ASection 143(2)Section 41(1)

invoking the provisions of section 41(1) of the Act, the Ld. AO treated the said amount of Rs.56,23,216/- as remission or cessation of liability and added the same as business income of the assessee for the relevant previous year. Accordingly, the assessment of the assessee was completed ... entry passed by M/s. Sai Sri Constructions to adjust the expenditures incurred by the assessee on its behalf, and there was no remission or cessation of liability in real terms. The Ld. AR further submitted that there is neither any waiver of liability nor any benefit accrued to the assessee

Aslam Kassam Merchant, Mumbai vs. Income Tax Officer Ward 20(1)(2), Mumbai

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

ITA 4695/MUM/2025[2015-16]Status: DisposedITAT Mumbai27 Oct 2025AY 2015-16

Bench: Shri Vikram Singh Yadav & Shri Raj Kumar Chauhanassessment Year : 2015-16 Aslam Kassam Merchant, Income Tax Officer, 85, Ground Floor, Ward-20(1)(2), Victoria Road, Vs. Piramal Chambers, Mustafa Bazar, Mumbai-400012. Mumbai-400010. Pan : Aefpm5272D (Appellant) (Respondent) For Assessee : Shri Pravin B. Shetty For Revenue : Shri Surendra Mohan, Sr.Dr Date Of Hearing : 14-10-2025 Date Of Pronouncement : 27-10-2025 O R D E R Per Vikram Singh Yadav, A.M : This Is An Appeal Filed By The Assessee Against The Order Of The Learned Commissioner Of Income Tax (Appeals)-National Faceless Appeal Centre (Nfac), Delhi [„Ld.Cit(A)‟], Dated 26-05-2025, Pertaining To Assessment Year (Ay) 2015-16, Wherein The Assessee Has Taken The Following Grounds Of Appeal:

For Appellant: Shri Pravin B. ShettyFor Respondent: Shri Surendra Mohan, Sr.DR
Section 133(6)Section 143(1)Section 143(2)Section 143(3)Section 41(1)

either evidenced by way of settlement waiver, or unilaterally written-off by the assessee. Accordingly, the assessee emphasized that there was no remission or cessation of liability in the instant case and that the AO had not brought any positive evidence on record to demonstrate that the liabilities were ... financial statements and in some of the cases, the amounts have been paid in subsequent financial year, therefore, the question of remission or cessation of liability doesn‟t arise for consideration. However, no cognizance has been taken on the submissions so filed by the assessee and the addition has been

Jayaram Reddy Boopesh Reddy, Bengaluru vs. Deputy Commissioner of Income Tax, Central Circle-2(4), Bengaluru

In the result the appeal of the assessee is hereby partly allowed for statistical purposes

ITA 711/BANG/2025[2021-22]Status: DisposedITAT Bangalore09 Oct 2025AY 2021-22

Bench: Shri Narender Kumar Chodhry & Shri Waseem Ahmed

For Appellant: Shri Bharat, CAFor Respondent: Shri Shivanad Kalakeri, CIT (DR)
Section 132Section 132(4)Section 153A

amount as payable in its balance sheet. It is settled law that unless the assessee has obtained any benefit by way of remission or cessation of liability, section 41(1) cannot be invoked. 41.1 The ld. AR further argued that mere non-payment of the liability for a long period

Jayarama Reddy Boopesh Reddy, Bengaluru vs. Deputy Commissioner of Income Tax, Central Circle-2(4), Bengaluru

ITA 710/BANG/2025[2020-21]Status: DisposedITAT Bangalore09 Oct 2025AY 2020-21

Bench: Shri Narender Kumar Chodhry & Shri Waseem Ahmed

For Appellant: Shri Bharat, CAFor Respondent: Shri Shivanad Kalakeri, CIT (DR)
Section 132Section 132(4)Section 153A

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, BANGALORE BEFORE SHRI NARENDER KUMAR CHODHRY, JUDICIAL MEMBER AND SHRI WASEEM AHMED

Jayarama Reddy Boopesh Reddy, Bengaluru vs. Deputy Commissioner of Income Tax, Central Circle-2(4), Bengaluru

ITA 709/BANG/2025[2018-19]Status: DisposedITAT Bangalore09 Oct 2025AY 2018-19

Bench: Shri Narender Kumar Chodhry & Shri Waseem Ahmed

For Appellant: Shri Bharat, CAFor Respondent: Shri Shivanad Kalakeri, CIT (DR)
Section 132Section 132(4)Section 153A

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, BANGALORE BEFORE SHRI NARENDER KUMAR CHODHRY, JUDICIAL MEMBER AND SHRI WASEEM AHMED