Section 41(1) of the Income Tax Act

Income-tax Act, 2025: s.38

Section 41(1) falls under section 41 of the Income-tax Act, 1961, which corresponds to section 38 (Certain sums deemed as profits and gains of business or profession) of the Income-tax Act, 2025.

Read section 38 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 41(1) is Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (227 ITR 172), cited in 621 of the 1,943 judgments on BharatTax that turn on this section.

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.

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.

CIT v. Godawari Power & Ispat Ltd.
42 Taxmann.com 551 · 2014 · High Court
104
citing judgments

Inter-unit transfer of power by an industrial undertaking eligible for Section 80IA deduction constitutes a specified domestic transaction under Section 92BA, requiring valuation at arm's length. This decision clarifies the application of Section 80IA(8) and transfer pricing regulations for such transactions.

Maruti Udyog v. DCIT
92 ITD 119 · 2005 · ITAT
87
citing judgments

The onus is on the revenue to establish the nexus between expenses incurred and exempt income before making a disallowance under section 14A.

CIT v. Varas International
284 ITR 80 · Supreme Court
79
citing judgments

An appellate authority can admit additional legal grounds for the first time, even if not raised earlier, provided these grounds are purely legal, go to the root of the matter, and the relevant facts for their adjudication are already on record.

Judgments on Section 41(1)

Dcm Shriram Industries Ltd., New Delhi vs. DCIT, New Delhi

In the result, the appeals of the assessee are disposed off as above

ITA 641/DEL/2012[2006-07]Status: DisposedITAT Delhi26 Jul 2023AY 2006-07

Bench: Sh. G. S. Pannu & Sh. Amit Shuklaassessment Year: 2004-05 Assessment Year: 2005-06 & Assessment Year: 2006-07 Dcm Shriram Industries Ltd. The Dcit 6Th Floor, Kanchanjunga Circle 7(1), Building New Delhi 18, Barakhamba Road, New Delhi-110001 Assessee By: Sh. Pradeep Dinodia, F.C.A. Sh. R. K. Kapoor F. C. A. Department By: Sh. Dilip Singh Kothari Cit-Dr Date Of Hearing .06.2023 Date Of Pronouncement 26.07.2023 1. The Aforesaid Appeals Have Been Filed By The Assessee Against Orders Passed By Ld. Cit (A) Vide The Common Order Dated 22.09.2014 For The A. Y. 2004-05 & A. Y. 2005-06 (I.E., Appeal Nos. 409 To 410/13-14/1560 To 1561) Appeal Relating To A. Y. 2006-07, Is Against Order Dated 07.12.2011 (Appeal No. 419/08- 09/118) For The Quantum Of Assessment Passed U/S 143(3) Of The Income Tax Act. In All These Appeals Identical Grounds Of Appeals Have Been Raised Against Certain Common Issues On The Additions 1

For Appellant: Sh. Pradeep Dinodia, F.C.AFor Respondent: Sh. Dilip Singh Kothari CIT-DR
Section 132Section 132(4)Section 133ASection 143(3)Section 153A(2)Section 153CSection 69C

Drishti Devcn P Ltd, Indore vs. The PCIT-1, Indore

Appeal is allowed partly

ITA 122/IND/2022[2017-18]Status: DisposedITAT Indore25 Jul 2023AY 2017-18

Bench: Shri Vijay Pal Rao & Shri B.M. Biyaniassessment Year: 2017-18 Drishti Devcon Private The Pcit-1, Limited, Indore 406, Pukhraj Corporate, बनाम/ Navlakha Bus Stand, Vs. Indore

Section 143(3)Section 263Section 40(3)

Royal Bombay Yatch Club, Mumbai vs. ITO Ward 17(3)(2), Mumbai

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

ITA 1602/MUM/2023[2017-18]Status: DisposedITAT Mumbai21 Jul 2023AY 2017-18
Section 143(3)Section 41(1)

DCIT Central Circle 2(1), Pune vs. M/S. Veena Industries Ltd, Pune

In the result, the appeal is dismissed

ITSSA 2/PUN/2020[2013-14]Status: DisposedITAT Pune20 Jul 2023AY 2013-14

Bench: Shri R.S. Syal & Shri Partha Sarathi Chaudhuryआयकर अपील सं. / It(Ss)A No.02/Pun/2020 "नधा"रण वष" / Assessment Year : 2013-14

Section 41(1)

JCIT, Special Range-4, New Delhi vs. Hindustan Coca-Cola Beverages Pvt. Ltd., New Delhi

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

ITA 5810/DEL/2018[2010-11]Status: DisposedITAT Delhi18 Jul 2023AY 2010-11

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Sachit Jolly, AdvFor Respondent: Shri Wasim Arshad, CIT- DR

Shri Rajan Sharma C/O Meek Enterprises, Phagwara vs. Income Tax Officer, Phagwara

In the result, appeal of the assessee is allowed

ITA 53/ASR/2023[2014-15]Status: DisposedITAT Amritsar17 Jul 2023AY 2014-15

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 129Section 133(6)Section 143(2)Section 143(3)Section 250rSection 41(1)Section 68

Hindustan Coca-Cola Beverages Pvt. Ltd., New Delhi vs. Addl. CIT, Special Range- 4, New Delhi

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

ITA 5671/DEL/2018[2010-11]Status: PendingITAT Delhi17 Jul 2023AY 2010-11

Bench: Shri N.K. Billaiya & Shri Anubhav Sharma

For Appellant: Shri Sachit Jolly, AdvFor Respondent: Shri Wasim Arshad, CIT- DR

Bhuramal Rajmal Surana & Sons Pvt. Ltd., Delhi vs. Commissioner of Income Tax (Appeals)-4, Jaipur

In the result, this appeal of the assessee is allowed

ITA 254/JPR/2023[2017-18]Status: DisposedITAT Jaipur17 Jul 2023AY 2017-18

Bench: Her; (B) No Proceedings Were Directed To Be Initiated In Original Appeal Order Dt. 28.02.2022 And/Or; (C) It Has Been Passed In Haste Without Affording Reasonable Opportunity To The Appellant.

For Appellant: Shri S.R. Sharma, CAFor Respondent: Mrs. Manisha Choudhary (Addl.CIT)
Section 115BSection 142(1)Section 143(2)Section 143(3)Section 154Section 270ASection 271ASection 41(1)Section 68

Uretek India Private Limited, New Delhi vs. ACIT Circle-27(1), New Delhi

In the result, the appeal of the assessee is allowed

ITA 8240/DEL/2019[2015-16]Status: DisposedITAT Delhi14 Jul 2023AY 2015-16

Bench: Shri Kul Bharat & Shri M.Balaganesh[Assessment Year : 2015-16] Uretek India Pvt.Ltd., Vs Acit, C/O-Rohit Malik & Associates, Circle-27(1), 1212A, Chiranjiv Tower, 43, New Delhi. Nehru Place, New Delhi-110019. Pan-Aaacu9168L Appellant Respondent Appellant By Dr. Rakesh Gupta, Adv. & Shri Somil Agarwal, Adv. Respondent By Shri Gurpreet Shah Singh, Sr.Dr Date Of Hearing 08.06.2023 Date Of Pronouncement 14.07.2023 Order

Section 143(1)Section 41(1)Section 68

Sri Pranab Chatterjee, Kolkata vs. ITO Ward-30(4), Kolkata

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

ITA 463/KOL/2023[2014-15]Status: DisposedITAT Kolkata13 Jul 2023AY 2014-15

Bench: Sri Rajesh Kumar & Sonjoy Sarma

Section 133(6)Section 143(3)Section 250Section 41(1)Section 68Section 69C

M/S Shri Balaji Builders, 1/43, Rhb Colony, Bhiwadi, Alwar vs. ACIT, Circle-1, Alwar

In the result, the appeal of the assessee is allowed

ITA 192/JPR/2023[2013-14]Status: DisposedITAT Jaipur12 Jul 2023AY 2013-14

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)

For Appellant: Shri P.C. Parwal (C.A)For Respondent: Shri A.S. Nehara (Addl.CIT)
Section 133ASection 142(1)Section 143(3)Section 41(1)Section 68

Harmuny Entertainment Pvt. Ltd., Kolkata vs. D.C.I.T., Circle - 9(1), Kolkata

In the result, appeal of the assessee is partly allowed

ITA 161/KOL/2023[2012-2013]Status: DisposedITAT Kolkata07 Jul 2023AY 2012-2013

Bench: Dr. Manish Borad, Hon’Ble & Shri Sonjoy Sarma, Hon’Blei.T.A. No. 161/Kol/2023 Assessment Year: 2012-13 Harmuny Entertainment Pvt. Ltd. Dcit, Circle-9(1), Kolkata 32A/28, Suren Sarkar Road Vs Kolkata - 700010 [Pan : Aacch5841H] अपीलाथ"/ (Assessee ) "" यथ"/ (Respondent) Assessee By : Shri Manish Tiwary, A/R Revenue By : Shri G. Hukugha Sema, Cit सुनवाई क" तारीख/Date Of Hearing : 13/04/2023 घोषणा क" तारीख /Date Of Pronouncement: 07/07/2023 आदेश/O R D E R Per Dr. Manish Borad: This Is An Appeal Preferred By The Assessee Against The Order Of The National Faceless Appeal Centre, Delhi (Hereinafter Referred To As The “Ld. Cit(A)”], Passed U/S 250 Of The Income-Tax Act, 1961 (Hereinafter The ‘Act’), Dated 31/01/2023 For The Assessment Year 2012-13. 2. The Assessee Has Raised The Following Grounds Of Appeal:- “1.) That On The Facts & In The Circumstances Of The Case, Order U/S 250 Of The Act Dated 31.01.2023 Passed By Ld. Cit (A), Nfac Is Arbitrary, Unjustified & Bad In Law. 2.) That On The Facts & In The Circumstances Of The Case, Ld. Cit(A), Nfac Erred In Confirming The Addition Made By Ao Amounting To Rs. 6,85,53,691/- Towards Provision For Bad & Doubtful Debts Under Provisions Of Income Tax Act, 1961 Without Considering The Fact That The Same Was Actually Written Off From The Accounts Of The Appellant In Previous Year. 3.) That On The Facts & In The Circumstances Of The Case, Ld. Cit(A), Nfac Erred In Confirming The Addition Of Rs. 3,12,27,393/- U/S 41(1) Read With Section 28(Iv) Of The Income Tax Act, 1961 On The Presumption That Liability

For Appellant: Shri Manish Tiwary, A/RFor Respondent: Shri G. Hukugha Sema, CIT
Section 143(1)Section 148Section 234BSection 234DSection 250Section 28Section 32Section 41(1)

Deputy Commissioner of Income Tax, Circle 1(1), Bhilai vs. Mesers Shree Arihant Traders, Bhilai

In the result, appeal of the revenue and cross objection of the assessee, both are allowed for statistical purposes

ITA 187/RPR/2019[2014-15]Status: DisposedITAT Raipur05 Jul 2023AY 2014-15

Bench: SHRI RAVISH SOOD (Judicial Member), SHRI ARUN KHODPIA (Accountant Member)

For Appellant: Shri Ravi Agrawal, CAFor Respondent: Shri V.K.Singh, CIT-DR
Section 2(22)(e)Section 40A(3)Section 41(1)

Chhattisgarh State Power Transmission Company Ltd, Raipur vs. Assistant Commissioner of Income Tax-4(1), Raipur

In the result, the appeal of the assessee in ITA No

ITA 81/RPR/2020[2011-12]Status: DisposedITAT Raipur04 Jul 2023AY 2011-12

Bench: Shri Ravish Sood & Shri Arun Khodpiaआयकर अपील सं. / Ita No.81/Rpr/2020 "नधा"रण वष" / Assessment Year : 2011-12 Chhattisgarh State Power Transmission Company Ltd. Executive Director (Fin.), Csptcl, Second Floor, Sldc Building, Cseb Office Campus, Danginiya Raipur-492 013 (C.G.) Pan : Aadcc5773E .......अपीलाथ" / Appellant बनाम / V/S. The Assistant Commissioner Of Income Tax, Circle-4(1), Raipur (C.G.) ……""यथ" / Respondent

For Appellant: Shri R.B Doshi, CAFor Respondent: Shri V.K Singh, CIT-DR
Section 143(2)Section 143(3)

Chhattisgarh State Power Transmission Company Limited, Raipur vs. Assistant Commissioner of Income Tax, Circle-4(1), Raipur

In the result, the appeal of the assessee in ITA No

ITA 143/RPR/2019[2012-13]Status: DisposedITAT Raipur04 Jul 2023AY 2012-13

Bench: Shri Ravish Sood & Shri Arun Khodpiaआयकर अपील सं. / Ita No.81/Rpr/2020 "नधा"रण वष" / Assessment Year : 2011-12 Chhattisgarh State Power Transmission Company Ltd. Executive Director (Fin.), Csptcl, Second Floor, Sldc Building, Cseb Office Campus, Danginiya Raipur-492 013 (C.G.) Pan : Aadcc5773E .......अपीलाथ" / Appellant बनाम / V/S. The Assistant Commissioner Of Income Tax, Circle-4(1), Raipur (C.G.) ……""यथ" / Respondent

For Appellant: Shri R.B Doshi, CAFor Respondent: Shri V.K Singh, CIT-DR
Section 143(2)Section 143(3)

Radhakrishna Foodland Pvt Ltd, Mumbai vs. Assistant Commissioner of Income Tax, Circle-3, Mumbai

In the result, the appeal filed by the assessee is partly allowed

ITA 1906/MUM/2022[2020-2021]Status: DisposedITAT Mumbai27 Jun 2023AY 2020-2021

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm Radhakrishna Foodland Pvt. Ltd. Asst. Cit, Circle-3, Radhakrishna House, Majiwade Village, Mumbai Vs. Majiwade, Mumbai-400 601

For Appellant: Shri M. A. GohelFor Respondent: Ms. Mahita Nair
Section 139(1)Section 143(1)Section 143(3)Section 2(24)(x)Section 250Section 36(1)(va)Section 41(1)Section 41(1)(a)

M/S Euroamer Garuda Resorts India Pvt Ltd, Bangalore vs. Deputy Commissioner of Income Tax Circle-2(1)(2), Bangalore

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

ITA 2755/BANG/2017[2013-14]Status: DisposedITAT Bangalore22 Jun 2023AY 2013-14

Bench: Shri Chandra Poojari & Smt. Beena Pillaiassessment Year: 2013-14

For Appellant: Ms. Jyothi Ratna, A.RFor Respondent: Dr. Sankarganesh Karuppiah, D.R
Section 14ASection 36Section 41(1)Section 69C

DCIT Corporate Circle 1(1), Chennai vs. Ansaldo Caldaie Boilers India Private Limited, Chennai

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

ITA 1999/CHNY/2019[2015-16]Status: DisposedITAT Chennai21 Jun 2023AY 2015-16

Bench: Shri V. Durga Rao & Shri G. Manjunathaआयकर अपील सं./I.T.A. No.1999/Chny/2019 िनधा"रण वष"/Assessment Year: 2015-16 The Deputy Commissioner Of Vs. M/S. Ansaldo Caldaie Boilers India Income Tax, Private Limited, New No. 45 (Old No. 45), No. 3, 3Rd Floor, Manjula Towers, Corporate Circle 1(1), Chennai 600 034. Ceebros Complex, Egmore, Chennai 600 008. [Pan:Aafca0623B] (अपीलाथ"/Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant By : Shri S. Senthil Kumaran, Cit ""थ" की ओर से/Respondent By : Shri R. Vijayaraghavan, Advocate सुनवाई की तारीख/ Date Of Hearing : 13.06.2023 घोषणा की तारीख /Date Of Pronouncement : 21.06.2023 आदेश /O R D E R Per V. Durga Rao: This Appeal Filed By The Revenue Is Directed Against The Order Of The Ld. Commissioner Of Income Tax (Appeals) 1, Chennai, Dated 29.03.2019 Relevant To The Assessment Year 2015-16. The Grounds Raised By The Revenue Are As Under: 1. The Order Of The Ld. Cit(A) Is Contrary To Law, Facts & Circumstances Of The Case. 2.1 The Cit(A) Erred In Deleting The Disallowance Made U/S 36(1)(Iii) Of The Act Based On The Fresh Evidences Furnished By The Assessee During The Course Of Appellate Proceedings, Without Affording Any Opportunity To The Ao Under Rule 46A For Verifying The Additional Evidences Submitted By The Assessee Based On Which Relief Was Given.

For Appellant: Shri S. Senthil Kumaran, CITFor Respondent: Shri R. Vijayaraghavan, Advocate
Section 36Section 36(1)Section 36(1)(ii)Section 36(1)(iii)

DCIT CC- 29, New Delhi vs. Surya Kiran Finance Corporation, New Delhi

The appeal of the revenue is dismissed

ITA 631/DEL/2021[2017-18]Status: DisposedITAT Delhi19 Jun 2023AY 2017-18

Bench: Sh. Saktijit Dey & Sh. N. K. Billaiyaassessment Year: 2017-18 Dcit M/S. Surya Kiran Finance Central Circle-29 Vs Corporation New Delhi 43/1, Rajpur Road, Civil Lines, Delhi-110054 Pan No.Abgfs7841A (Appellant) (Respondent) Appellant By Sh. Vivek Vardhan, Sr. Dr Respondent By Sh. T. M. Shivakumar, Advocate Date Of Hearing: 14/06/2023 Date Of Pronouncement: /06/2023 Order Per N. K. Billaiya, Am: This Appeal By The Revenue Is Preferred Against The Order Of The Cit(A)-30, New Delhi Dated 05.02.2021 Pertaining To A.Y.2017-18. 2. The Only Grievance Of The Revenue Is That The Cit(A) Erred In Deleting The Disallowance Of Rs.15695780/- . 3. Briefly Stated The Facts Of The Case Are That During The Course Of The Scrutiny Assessment Proceedings The Ao Noticed That The Assessee Has Repaid Loans Amounting Rs.15695780/-. The Ao Was Of The Opinion That These Companies Are Bogus Companies Of Different Entry Operators & Was Further Of The Opinion That The Repayment Of Loan Is Also Bogus & There Is A Cessation Of Liability U/S. 41 (1) Of The Act & Went On To Make The Addition Of Rs.15695780/-. 4. Assessee Agitated The Matter Before The Cit(A) & Vehemently Contended That The Loans Taken In Earlier Year Were Repaid By The Assessee, Therefore, There Is No Question Of Cessation Of Liability & Infact The Assessee Has Discharged The Loan Liability. After Considering The Facts & The Submission The Cit(A) Observed As Under :-

Section 41Section 41(1)

Chhattisgarh State Power Generation Co. Ltd., Raipur vs. Dy. Commissioner of Income Tax-1(1), Raipur

In the result, the appeal of the assessee in ITA No

ITA 24/RPR/2022[2018-19]Status: DisposedITAT Raipur15 Jun 2023AY 2018-19

Bench: Shri Ravish Sood & Shri Arun Khodpiaआयकर अपील सं. / Ita No.16/Rpr/2017 "नधा"रण वष" / Assessment Year : 2009-10 Chhattisgarh State Power Generation Company Ltd. O/O. Executive Director-Finance Ground Floor, Vidyut Seva Bhawan, Daganiya, Raipur-492 001 (C.G.) Pan : Aadcc5772F .......अपीलाथ" / Appellant बनाम / V/S. The Assistant Commissioner Of Income Tax, Circle-1(2), Raipur (C.G.) ……""यथ" / Respondent आयकर अपील सं. / Ita No.24/Rpr/2022 "नधा"रण वष" / Assessment Year : 2018-19 Chhattisgarh State Power Generation Company Ltd. Ground Floor, Vidyut Seva Bhawan, Daganiya, Raipur-492 001 (C.G.) Pan : Aadcc5772F .......अपीलाथ" / Appellant बनाम / V/S.

For Appellant: Shri R.B Doshi, CAFor Respondent: Shri V.K Singh, CIT-DR
Section 143(2)Section 143(3)Section 32