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We are of a strong conviction that on the stand-alone basis that a 'trade liability' is outstanding in the 'books of account' of an assessee for several years cannot suffice for bringing the same within the realm of the provisions of Sec.41(1) of the Act. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of Jain Exports (P) Ltd. (supra) In the aforesaid case, the Hon'ble High Court had observed that in order to attract the provisions of Sec. 41(1) of the Act, it is necessary that there should be a cessation or remission of liability.

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Section 41(1) of the Income Tax Act, 1961 — Remission or cessation of trading liability — Provisions of section 41(1) could not have been invoked to add said amount to assessee's taxable income as assessee had shown outstanding trade payables in its books of account for last three years in absence of any evidence on record that there was a final remission or cessation of a trading liability or any part of it during relevant previous year — Deputy Commissioner of income tax vs. Sri Radhakrishna Shipping Ltd. [2019] 179 ITD 139 (Mumbai—trib)

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