M/S. MONTE INTERNATIONAL THROUGH MR. KULBHUSHAN GOYAL Vs. COMMISSIONER OF INCOME TAX, RISHI NAGAR, LUDHIANA

JUDGEMENT

(1.) THIS appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 (for short "the Act") against the order of the Income Tax Appellate Tribunal, Chandigarh Bench "B", Chandigarh (hereinafter referred to as "the Tribunal") passed in ITA No. 1231/Chandi/2005 on 31.7.2006 for the assessment year 2001 -02. According to the learned counsel for the assessee, the following substantial questions of law arise for consideration of this Court:

(2.) WHETHER , on the facts and circumstances of the case, the ITAT was justified in confirming the action of CIT (A) in not allowing legal deduction as claimed by the appellant u/s 80HHC of the Income Tax Act, 1961 by completely ignoring the established principles of law regarding deeming provisions though applying the provisions of section 41 (1)(a) of the Income Tax Act, 1961 while on the other hand completely ignoring the true nature of the impugned amount of cessation of liabilities which had resulted in the reduction of purchase price of the raw material and thereby resulting into more Export Profits and thus cannot be denied the impugned deduction u/s 80HHC of the Income Tax Act, 1961.

(3.) SECTION 41 (1) of the Act deals with profits which are chargeable to tax arising on remission or cessation of trading liabilities. Under the provisions of sub -section (1) of Section 41 of the Act, an assessee who had been allowed any deduction on account of any loss, expenditure or trading liability in any year which ceases to be effective and as a result the assessee receives any amount in respect thereof, the amount so obtained by him or the value of benefit accruing to him is exigible to tax as income of the year in which such remission or cessation has taken place. By introducing fiction, the said receipt is chargeable under the head "income from business or profession.