- (1.) THE controversy here is with regard to unclaimed liabilities of Rs. 48,610, written back by the assessee in its profit and loss account, the point in issue being whether this represented cessation or remission of the assessee's liabilities, within the meaning of Section 41 (1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act" ).
(2.) THE assessee, Lal Textile Finishing Mills (P.) Ltd. , credited on its income side a sum of Rs. 48,610 representing the total sum of unclaimed liability written back in its profit and loss account. It was the plea of the assessee that this amount was neither cessation nor remission of its liabilities within the meaning of Section 41 (1) of the Act and, therefore, this amount was entitled to deduction. The assessee's plea in this behalf was rejected by the Inspecting Assistant Commissioner, whose order, was later upheld in appeal by the Commissioner of Income-tax (Appeals ). The Tribunal, however, decided in favour of the assessee and accepted its contention that this amount of Rs. 48,610 could not be included in its taxable income for the assessment year 1978-79. It is in this factual background that the following question has now been referred to this court for its opinion : "whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the sum of Rs. 48,610 credited by the assessee as its income to its profit and loss account of the relevant previous year is not assessable to tax as the income of the assessee ?"
(3.) THE answer to the question posed is provided by the judgment of this court in C1t v. Haryana Co-operative Sugar Mills Ltd. [1985] 154 ITR 751, where it was held that an amount can be brought to tax under Section 41 (1) of the Act, if two conditions are satisfied, namely, that the amount has been allowed as deduction in some earlier year and that during the assessment year in question, the assessee had received the benefit representing the amount in question by way of cessation or remission of the liability in regard to the said amount.;