INCOME TAX ACT, 1961

Business income - Profits chargeable to tax under section 41(1) -Whether deduction allowed in the previous year

Held: Unless an allowance or deduction had been made in the previous year in respect of loss, expenditure or trading liability there can be no addition under section 41(1). Since, order of Tribunal shows that there was no finding in regard to whether any deduction or allowance was made in the assessment of the assessee in an earlier year. Therefore, remand the matter to Tribunal for a fresh decision in accordance with law after hearing the parties concerned in which a clear finding should be given whether any deduction has been allowed in the assessment of the assessee in an earlier year so as to comply with section 41(1).

Income-tax Act, 1961, Section 41(1)

Decision: Matter remand

Case Law Analysis:Tirunelveli Motor Bus Service Co. (P.) Ltd. v. CIT [1970] 78 ITR 55 (SC) [Para 5], CIT v. Thakurdas [1984] 147 ITR 549/[1983] 12 Taxman 344 (MP) [Para 6], CIT v. Kharaiti Lal & Co. [1989] 178 ITR 265/ 45 Taxman 337 (Punj. & Har.) [Para 6], CIT v. Lal Textile Finishing Mills (P.) Ltd. [1989] 180 ITR 45/ 45 Taxman 310 (Punj. & Har.) [Para 6], CIT v. Pranlal P. Doshi [1993] 201 ITR 756/ 66 Taxman 630 (Guj.) [Para 6], CIT v. Western Rolling Mills Ltd. [1994] 72 Taxman 155 (Bom.) [Para 6], Juggilal Kamlapat Bankers v. CIT [1975] 101 ITR 40 (All.) [Para 12], Sharma & Co. v. ITO [1972] 86 ITR 741 (All.) [Para 12] and Indian Motor Transport Co. v. CIT [1978] 114 ITR 677 (All.) [Para 12].

Narayanan Chettiar Industries v. ITO