“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

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

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

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

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

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

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

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

ITA 708/BANG/2025[2016-17]Status: DisposedITAT Bangalore09 Oct 2025AY 2016-17

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 706/BANG/2025[2014-15]Status: DisposedITAT Bangalore09 Oct 2025AY 2014-15

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 Id. 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 Cirlce-2(4), Bengaluru

ITA 705/BANG/2025[2013-14]Status: DisposedITAT Bangalore09 Oct 2025AY 2013-14

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

Ginni Filaments Ltd., Gautam Budh Nagar vs. DCIT Circle 1(1)(1), Agra

In the result, the appeal is allowed for statistical purposes

ITA 64/AGR/2025[2020-21]Status: DisposedITAT Agra26 Sept 2025AY 2020-21

Bench: : Shri S. Rifaur Rahman & Shri Sunil Kumar Singhassessment Year: 2020-21

Section 143(3)Section 144BSection 250Section 41(1)

respect of outstanding balance of Sundry creditors on the misconceived ground of remission or cessation of liability without appreciating factual and legal position. 2.2 That there being no case of any remission or cessation of liability in terms of section 41(1) and the outstanding balance of Sundry creditors being

Gurmeet Singh Sethi, New Delhi vs. ITO Ward - 45(2), New Delhi

In the result, the appeal filed by the assessee stands Allowed

ITA 334/DEL/2020[2012-13]Status: DisposedITAT Delhi17 Sept 2025AY 2012-13

Bench: Shri Anubhav Sharma & Shri Krinwant Sahay, Accoutant Member Asstt. Year : 2012-13 Gurmeet Singh Sethi, Vs. Ito, Ward 7(4), A-37, Rajouri Garden, New Delhi New Delhi – 110 027 (Pan: Aaaps4868G) (Appellant) (Respondent) Appellant By : Sh. Anil Chopra, Ca Respondent By : Ms. Harpreet Kaur Hansra, Sr. Dr. Date Of Hearing 28.08.2025 Date Of Pronouncement 17.09.2025 Order

For Appellant: Sh. Anil Chopra, CAFor Respondent: Ms. Harpreet Kaur Hansra, SR. DR

Section 133(6)Section 139(1)Section 143(3)Section 41(1)Section 68

accounts which were produced in the course of assessment proceedings. There should be benefit obtained by the assessee by way of remission or cessation of liability either in cash or in any other manner. There is no document on record which prove that there is actual remission and cessation

Upendra Kumar Soni, Kota vs. ACIT, Central Corcle-Kota, Kota

In the result, both the appeals of the assesee are allowed for statistical purposes

ITA 827/JPR/2025[2018-19]Status: DisposedITAT Jaipur11 Aug 2025AY 2018-19

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI GAGAN GOYAL (Accountant Member)

For Appellant: Shri Saurav Harsh, AdvocateFor Respondent: Mrs. Alka Gautam, CIT-DR

Section 144Section 145(3)Section 153ASection 68Section 69A

KOTA the same could not be added in the year under consideration. Further, argument of the assessee was that there was no remission or cessation of liability as required under section 41(1) and, thus, the Assessing Officer was not justified in adding those amounts. As rightly highlighted ... therefore, the same could not be added in the year under consideration. Further, argument of the assessee was that there was no remission or cessation of liability as required under section 41(1) and, thus, the Assessing Officer was not justified in adding those amounts. As rightly highlighted

Upendra Kumar Soni, Kota vs. ACIT, Central Circle-Kota, Central Circle, Kota

In the result, both the appeals of the assesee are allowed for statistical purposes

ITA 826/JPR/2025[2017-18]Status: DisposedITAT Jaipur11 Aug 2025AY 2017-18

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI GAGAN GOYAL (Accountant Member)

For Appellant: Shri Saurav Harsh, AdvocateFor Respondent: Mrs. Alka Gautam, CIT-DR

Section 144Section 145(3)Section 153ASection 68Section 69A

Indur Thanwerdas Dadlani, Mumbai vs. The Principal Commissioner of Income Tax PCIT, Mumbai-42, Mumbai

In the result, the appeal filed by the assessee stands allowed without any order as to cost

ITA 2476/MUM/2025[2020-21]Status: DisposedITAT Mumbai04 Aug 2025AY 2020-21

Bench: Hon’Ble Shri Sandeep Gosain & Shri Prabhash Shankarindur Thanwerdas Dadlani Vs. Pr. Cit Flat No. 4604, The Imperial Mumbai – 42 Towers, Mp Mill Compound, Room No. 741, Aayakar Bb Nakashe Marg, Mardeo, Bhavan, Mk Road, Mumbai – 400034. Mumbai Pan/Gir No. Aacpd5262D (Applicant) (Respondent)

Section 142(1)Section 143(2)Section 263Section 57Section 74

assessment year 1982-83, was an issue on which a possible view was that there was no final or irrevocable remission or cessation of liability, within the meaning of section 41(1) of the Act, during assessment year 1982-83. This view could not, by any stretch of logic

Index Logistics Private Limited, Mumbai vs. Assistant Commissioner of Income Tax Central Circle-1(2), Mumbai

In the result the appeal filed by the assessee stands partly

ITA 4641/MUM/2023[2021-22]Status: DisposedITAT Mumbai09 Jul 2025AY 2021-22

Bench: Shri Sandeep Gosain, () & Shri Prabhash Shankar, ()

Section 115BSection 132Section 132(3)Section 143(3)Section 41(1)Section 68

267/208 Taxman 54/345 ITR 64 (Bombay), wherein, it was held by Hon'ble Bombay High Court that, "Whether since there was no remission or cessation of liability in question during current assessment year, addition made by Assessing Officer was to be deleted." Also, in the case of Sugauli Sugar Works

M/S Chatta Sugar Co. Ltd, Mathura vs. A.C.I..T Circle-3, Mathura

In the result, the appeal of the assessee is allowed

ITA 129/AGR/2015[2009-10]Status: DisposedITAT Agra01 Jul 2025AY 2009-10

Bench: Shri Sunil Kumar Singh & Shri Brajesh Kumar Singh[Assessment Year: 2009-10]

Section 142(1)Section 143(3)Section 28Section 41(1)

section 41(1) of the Act as the grant in aid received by the assessee could never be considered in terms of remission or cessations of liability thereby partaking the character of income in the hands of the appellant. In regard to the same it is observed ... held that on either of the two scores whether the grant in aid is revenue receipt or it is causing a remission or cessation of liability in terms of section 41(1) of the Act, the action of the AO in treating grant under consideration as a revenue receipt

DCIT, ACIT10OSD, New Delhi, C R Building vs. Ganpati Builatech Pvt. Ltd., Civil Lines

In the result, appeal of the appellant is allowed

ITA 2834/DEL/2023[2014-15]Status: DisposedITAT Delhi01 Jul 2025AY 2014-15

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

Section 143(3)Section 41(1)

balance sheet and no provision was, made to write-off outstanding liabilities in its books of account, there would be no remission or cessation of liability under section 41(1) even if sundry creditors were not in existence at address provided and PAN of creditors were found to be invalid

ITO-WD1(2)(1) Ahmedabad, Vejalpur Income Tax Office vs. Bhrugesh Dineshbhai Shah, Kalupur Ahmedabad

In the result, Ground No.2 raised by the assesse is hereby allowed

ITA 1219/AHD/2024[2017-18]Status: DisposedITAT Ahmedabad11 Apr 2025AY 2017-18

Bench: The Ao Who Made The Following Additions: I. Estimation Of Gross Profit At 5% On Purchases & Disallowance Of 25% Expenses Rs.74,85,796/-, Ii. Unexplained Credit U/S. 68 Of The Act Of Rs.18,77,688/-, Iii. Sundry Creditors & Unexplained Rs.8,83,31,369/- & Iv. Capital Work-In-Progress Rs.15,87,000/-

For Appellant: Shri Divyakant Parikh, ARFor Respondent: Shri V Nandakumar, CIT.DR &

Section 142(1)Section 143(3)Section 68Section 69

1219/Ahd/2024 (Bhrugesh Dineshbhai Shah) A.Y. 2017-18 could not have been invoked as there is no remission of cessation of liability by observing as follows: “10. As per the aforesaid provisions of Section 41(1) of the Act, 1961, there has to be remission or cessation of trading liability. Merely ... cannot be made to consider such liability as income of the year under consideration without there being any remission or cessation of liability.” 7.4 Therefore, the deletion made by the CIT(A) does not require any interference. In the result, ground no.2 raised by the Revenue is devoid of merit

Bhrugesh Dineshbhai Shah, Ahmedabad vs. The ITO, Ward-1(2)(1), Ahmedabad

In the result, Ground No.2 raised by the assesse is hereby allowed

ITA 1214/AHD/2024[2017-18]Status: DisposedITAT Ahmedabad11 Apr 2025AY 2017-18

For Appellant: Shri Divyakant Parikh, ARFor Respondent: Shri V Nandakumar, CIT.DR &

Section 142(1)Section 143(3)Section 68Section 69

Naraya Securities Ltd., Delhi vs. DCIT, CC-1, Delhi

In the result, the appeal of the assessee is allowed

ITA 956/DEL/2023[2019-20]Status: DisposedITAT Delhi11 Apr 2025AY 2019-20

Bench: Shri Pradip Kumar Kedia & Shri Sudhir Kumar

Section 115JSection 250Section 28

No.956/Del/2023 return the loan due to losses cannot be equated with benefit bestowed upon or obtained by the assessee by way of remission or cessation of liability under s. 41(1) or any benefit arising from business as contemplated under s. 28(iv) of the Act. The Ld. Counsel

Late Mahesh Ramanlal Modi L/H Manish Mahesh Modi, Bharuch vs. ACIT Circle-1, Bharuch

In the result, ground No. VII of appeal raised by the assessee is also allowed for statistical purposes

ITA 999/SRT/2024[2017-18]Status: DisposedITAT Surat04 Mar 2025AY 2017-18

Bench: Shri Pawan Singh & Shri Bijayananda Pruseth(Physical Hearing) Late Mahesh Ramanlal Modi, A.C.I.T., Through L-H Manish Mahesh Modi, Circle-1, Vs. Near Shakuntal Apartment, Dahej Bharuch. Bypass Road At Nandelav, Bharuch-392001 (Gujarat) Pan No. Adfpm 4030 N Appellant/ Assessee Respondent/ Revenue

Section 115BSection 23(5)Section 24Section 254(1)Section 40Section 69A

details of sundry creditors. The assessee stated that liability continues as on 31/03/2017 which did not cease to exist. There is no remission or cessation of liability. The Assessing Officer cannot decide that the liability has ceased to exist. In support of its claim, the assessee relied upon certain case

A& A International Trading Pvt. Ltd, Chennai vs. ACIT, Corp. Circle 1(1), Chennai

In the result, the corresponding grounds raised by the revenue stand dismissed…

ITA 2231/CHNY/2024[2016-17]Status: DisposedITAT Chennai12 Feb 2025AY 2016-17

Bench: Shri Aby T Varkey & Shri Amitabh Shuklaआयकर अपील सं./Ita No.2231/Chny/2024, निर्ाारण वर्ा /Assessment Years: 2016-17 A & A International Trading Pvt Ltd, The Asst. Commissioner Of Income No.6-5/140, Kaviarasu Kannadasan Tax, Nagar, Kodungaiyur, Corporate Circle-1(1), Chennai-600 118. Chennai. [Pan: Aaica0039J] आयकर अपील सं./Sa No.15/Chny/2025 (Ita No.2231/Chny/2024) निर्ाारण वर्ा /Assessment Years: 2016-17 (प्रत्यर्थी/Respondent) (अपीलार्थी/Appellant) अपीलार्थी की ओर से/ Assessee By : Shri D.Anand, Advocate प्रत्यर्थी की ओर से /Revenue By : Shri A.Sasikumar, Cit सुिवाई की तारीख/Date Of Hearing : 05.02.2025 घोर्णा की तारीख /Date Of Pronouncement : 12.02.2025 आदेश / O R D E R Per Amitabh Shukla, A.M : These Appeals Are Filed By The Assessee Against The Order Bearing Din & Order No.Itba/Nfac/S/250/2024-25/1065907633(1) Dated 21.06.2024 Of The Learned Commissioner Of Income Tax [Herein After “Cit(A), National Faceless Appeal Center[Nfac], Delhi, For The Assessment Years 2016-17 & Stay Petition No.15/Chny/2025 Arising Out Of Ita No.2231/Chny/2024 For The Assessment Year 2016-17. Page - 1 - Of 8

For Appellant: Shri D.Anand, AdvocateFor Respondent: Shri A.Sasikumar, CIT

Section 250Section 41(1)

also a fact that the assessee, all along, continues to recognize this liability its books of accounts and accordingly, no case of remission or cessation of liability u/s 41(1) could be made out against the assessee. Therefore, concurring with uncontroverted factual findings rendered in the impugned order in terms

Shri Rajesh Ramchandra Dake, Panvel vs. Dy CIT CC-1, Mumbai

ITA 3/MUM/2021[2008-09]Status: DisposedITAT Mumbai23 Jan 2025AY 2008-09

For Appellant: \nShri Rajesh Ramchandra DakeFor Respondent: \nDy. Commissioner of Income Tax

Section 10Section 132Section 139(1)Section 143(1)Section 143(3)Section 153ASection 250

sheet and the same has been confirmed as receivable by VPPL in the confirmation letter and thus there has not been any remission or cessation of liability within the meaning of provision under Section 41(1) of the Act during the relevant year under consideration. Therefore, the provision of Section ... applicable in the absence of any remission or cessation of liability. The Assessee in this regard also relied on various judgments including CIT vs. Sugauli Sugar Works (P) Ltd. (1999) 236 ITR 518 (SC).\n\n14.5 On the contrary the Ld. D.R. refuted the claim of the Assessee

Fcg Flameproof Control Gears Private Limited, Mumbai vs. ACIT 6(3)(1), Mumbai

In the result, the appeal of the assessee is allowed

ITA 4820/MUM/2024[2017-18]Status: DisposedITAT Mumbai30 Dec 2024AY 2017-18

Bench: Shri Amarjit Singh & Shri Sunil Kumar Singhassessment Year: 2017-18 Fcg Flameproof Control Gears Acit, Circle-6(3)(1), Private Limited Mumbai A1/53, Shah & Nahar Vs. Industrial Estate, Sitaram Jadhav Road, Lower Parel West, Mumbai-400013. Pan: Aaacc 2688 K (Appellant) (Respondent) Present For: Assessee By : None Revenue By : Shri Nishant Somaiya, Sr. Dr

For Appellant: NoneFor Respondent: Shri Nishant Somaiya, Sr. DR

Section 143(3)Section 41(1)

year in which such benefit is derived. However, we find that in the case of the assessee it has not claimed any remission or cessation of liability as prescribed in section 41(1) of the Act. As per the financial statement for the A.Y. 2016-17, the assessee still

Deputy Commissioner of Income Tax, Range-4, Lucknow vs. Smt. Mohini Agarwal, L/H Late Mukesh Agarwal, Lucknow

In the result, the appeal filed by the Revenue is dismissed and Cross

ITA 170/LKW/2020[2014-15]Status: DisposedITAT Lucknow17 Dec 2024AY 2014-15

Bench: Shri Anadee Nath Misshra & Shri Subhash Malguria

Section 143(3)Section 68

shoulders of the Assessee. 3. Sundry Creditors can be added as income u/s 41(1) of the IT Act once there is remission or cessation of liability. Mere fact that these amounts were outstanding and the AO was not satisfied with the documents submitted, the same cannot be a added

Dy. Commissioner of Income Tax, Pune vs. Indus Biotech Private Limited, Pune

Appeal is dismissed

ITA 863/PUN/2023[2018-19]Status: DisposedITAT Pune22 Oct 2024AY 2018-19

Bench: Shri R.K. Panda & Shri S.S. Godara"नधा"रण वष" / Assessment Year : 2018-19 Dcit, Vs. Indus Biotech Pvt. Ltd. Circle-1(1), 1, Rahul Residency, Pune Plot Nos.6 & 7, Off Salunke Vihar Road, Kondhwa, Kondhwa Bk B.O., Pune – 411048 Maharashtra Pan: Aaaci5708E Appellant Respondent

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

remission of liability by the creditors or even an unilateral act by the appellant in this regard. c) This issue of remission or cessation of liability has been discussed and decided in detail by Hon'ble Karnataka High Court in CIT vs. Alvares and Thomas (2016) reported