IN THE ITAT
Income-tax
Officer, Ward 24(3),
v.
Smt. Kavita Khurana
R.V. EASWAR, VICE
PRESIDENT
AND R.C. SHARMA, ACCOUNTANT MEMBER
IT APPEAL
NO. 1474 (
[ASSESSMENT YEAR
1999-2000]
OCTOBER 19, 2007
Section 59, read with section 41(1), of the Income-tax
Act, 1961 - Income from other sources - Profits chargeable to tax - Assessment
year 1999-2000 - Whether in order to apply provisions of section 59(1) read
with section 41(1) to computation of income from other sources, liability in
respect of which any cessation or remission takes place during year has to be
of nature similar to trading liability in respect of which deduction was
allowed in earlier years in computing taxable income under head ‘Income from
other sources’ - Held, yes
FACTS
The assessee had taken
loan from various persons and in the balance sheet for the year ended on
31-3-1999 had shown said amount as loan liability. The Assessing Officer having
noticed, that in some of the cases the assessee had not filed confirmation or there
was some difference in the amount shown by these persons in their respective
statements of account, invoked the provisions of section 59(1) and made
addition of certain amount to the income of the assessee on account of
liability outstanding as payable to these persons. On appeal, the Commissioner
(Appeals) deleted the impugned addition made by the Assessing Officer observing
that the liability shown by the assessee was in the nature of loan liability
brought forward from the earlier years and no credit or deduction was taken by
the assessee while computing her income in any of the earlier assessment years
and, therefore, the provisions of section 59(1), read with section 41(1), were
not applicable.
On revenue’s appeal :
HELD
The provisions
of section 59(1) extends the principles of section 41(1) to the
computation of income under the head ‘Income from other sources’. Under the
provisions of section 41(1), where an assessee who has been allowed deduction
in respect of any trading liability in any year obtains any benefit in any
subsequent year in respect of such trading liability by way of remission or
cessation thereof, the value of benefit accrued to him is deemed to be profits
and gains of the business and chargeable to tax as income of the previous year
in which such benefit is obtained. In order to apply these provisions to
computation of income from other sources, the liability in respect of which any
cessation or remission takes place during the year has to be of the nature
similar to the trading liability in respect of which deduction was allowed in
earlier years in computing the taxable income under the head ‘Income from other
sources’. In the instant case, the liabilities outstanding during the year were
not in the nature of liabilities similar to the trading liabilities in respect
of which any deduction or allowance was made in computing the income from other
sources in the earlier years. These liabilities were in the nature of loan
liabilities, which would not fall within the purview of section 59(1), read
with section 41(1). Further, while invoking the provisions of section 59(1),
the onus is on the revenue to first establish that the assessee has taken
benefit of deduction of any such liability in any of the earlier years and
which has now ceased to exist. In the instant case, no finding had been
recorded by the Assessing Officer with regard to the year in which the assessee
had taken benefit of deduction of these liabilities while computing her income
in any of the earlier previous years. Therefore, the provisions of section
59(1), read with section 41(1) were not applicable to instant case. Therefore,
the Commissioner (Appeals) was justified in his action.
Jasdeep Singh for the Appellant.
nn