Sec 41(1) applies where deduction is allowed in earlier years in computing business income and assessee obtained benefit on the remession of the same in the next year

Last updated: 06 July 2012

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Section 41(1) has been incorporated in the Act to cover a particular facts situation. Section applies where a trading liability was allowed as a deduction in earlier years in computing the business income of the assessee and the assessee has obtained a benefit in respect of such trading liability in later year by way of remission or cessation of the liability. In such a case, the section says that whatever benefit has arisen to the assessee in the later year by way of remission of the liability will be brought to tax in that year. The principle behind the section is that a provision intended to ensure that the assessee does not get away with a double befit once by way of a deduction in an earlier assessment year and again by not being taxed on the benefit received by him in a later year with reference to the liability earlier allowed as a deduction. In this case, four years have elapsed and the Assessing Officer took a view that the liability has ceased to exist.

Citation :
Assistant Commissioner of IT, Circle 10(1), New Delhi. (Appellant) Vs. M/s. Delhi State Mineral Development Corporation Ltd., N-36, Bombay Life Building, Connaught Place, N.Delhi. (PAN: AAACD1236E) (Respondent)