COMMISSIONER OF INCOME TAX Vs. KHAIRUNNISSA EBRAHIM

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Cochin Bench, has referred the following questions of law for the opinion of this court under Section 256(2) of the Income-tax Act, 1961 ( " the Act " ), at the instance of the Revenue consequent on the directions issued by this court in O. P. No. 5694 of 1983 :

(2.) THE assessee, Khairunnissa Ebrahim, is the proprietrix of Ama Sea Foods, engaged in the processing of sea foods which are exported. She owed a sum of Rs. 10,17,371 to the Indian Tobacco Company Ltd. with whom she had certain business transactions. This sum represents the advances made by the said company to her from year to year against supplies made and to be made of processed fish products. THE assessee was not able to liquidate this liability by making good the supplies of the goods. On March 1, 1976, an agreement was entered into between the assessee and the company which provided as follows :

(3.) ON appeal, the Commissioner of Income-tax (Appeals ) accepted the contention of the assessee that the requirements of Section 41(1) were not satisfied in this case. Firstly, lie held that the requirement of the section that an allowance or reduction should have been made in the assessments for some earlier years towards loss, expenditure or trading liability was not satisfied in this case. Secondly in any event, he held that the allowance should have been in respect of such loss or expenditure, to attract which the Income-tax Officer had to show that certain specific, explicit, unmistakably identifiable loss, deduction or allowance had been made in the past. This requirement was not satisfied in this case, The Commissioner also held that, even assuming that there was some relinquishment, it was not without consideration nor was it unilateral or unqualified. For all these reasons, he allowed the appeal and deleted the addition.