Ca final dt

it is one of the largest producer of lined cartons in India.

case crux:- the provision of sec 41(1) r attracted in case of waiver of wrkng cap loan bcos it amnts to remision of tradng liab but in the present case remission was for loan for capital asset so sec 41(1) is nt attractd here bcos it cannt be treated as remission of traiding liab.

hi mannu......

provisions of sec 41(1) are attracted in case of waiver of working cap loan eg. cash credit loan.

since money borrowed for day to day affairs ie for circulating working capital ,so  writing off means benefit directly accruing in the revenue field thus it is a remission and cessation of trading liability.

provisions of sec 41(1) are not attracted in case of waiver of term loan eg. capital asset loan

money did not come into posession on account of any trading transaction , receipts were capital in nature , writing off , no benefit directly in the revenue field.

Thanks,

SUVAJIT.

Two Conditions has to be satisfied for attraction of section 41(1)

1. deduction was allowed in respect of loss, expenditure(Revenue or capital) or Trading liability incurred by the Assesse, abd

2. the taxpayer has obtained a refund of such trading liability, loss or expenditure OR has obtained a benefit by way of remission or cessation(writting off) of such trading liability.

In the case study as mentioned by you, Loan taken for purchasing Capital Asset doesn't arise any deduction but the Cash Credit Loan taken for Working Capital might have arose the trading liability and the same had been allowed as deduction. And the Tax payer in the current previous year gets the benefit by way of partial write off the said CC loan. So such amount of Benefit will be taxed as the business income of the Asessee in the Previous year in which such benefit was obtained.