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HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE

Commissioner of Income Tax, Calcutta v. Sugauli Sugar Works (P) Ltd.

Civil Appeal No. 2344 of 1992
[1999] 1 SCR 400 ·
41(1) (historical)

Reasoned final decisionAssessee
Download AKHB noteFive-part research note
Sources & disclosures includedDownload original judgment / order

Two-judge bench · M. Srinivasan, J. · U.C. Banerjee, J.

Assessment years: 1965-66

01 · Facts of the case

For AY 1965-66 the company transferred Rs 3,45,000 from an old suspense account, running from 1946-47 to 1948-49, to capital reserve. The narrative separately mentions Rs 1,29,000 connected with repaid deposits and advances and an addition of Rs 2,56,529. It does not reconcile those amounts (physical pages 2–3).

The first appeal failed, but the Tribunal held that the unilateral entry did not bring the amount within section 41. The High Court agreed. Revenue argued before the Supreme Court that more than twenty years without recovery action established cessation of the debt (physical page 3).

Source: See the proposition-specific paragraph and PDF-page references below.

02 · Discussion by the Hon’ble Court

Under the statutory text applicable to this old assessment, the assessee had to obtain the relevant amount or benefit by remission or cessation. A unilateral accounting transfer alone did not supply that consequence. The Court distinguished cases with materially different facts and rejected Bennett Coleman’s contrary reasoning on unilateral treatment of a time-barred liability (paragraphs 3–7, physical pages 4–6).

Limitation generally bars enforcement rather than extinguishing the debt. The Court stressed that the creditor’s circumstances and possible grounds permitting enforcement could not simply be determined from the debtor’s assertion alone. It adopted the cited J.K. Chemicals and Bharat Iron reasoning and held that this entry did not establish cessation or the statutory benefit. The quoted formulations concern the historical provision, before the later unilateral-write-off Explanation (paragraphs 7–10, physical pages 6–8).

Source: See the proposition-specific paragraph and PDF-page references below.

03 · Judicial decision

Revenue’s appeal was dismissed without costs, sustaining the assessee’s success on the historical section 41 addition. No fresh inquiry, refund calculation or creditor-liability decree was ordered (paragraph 11, physical page 8).

Source: See the proposition-specific paragraph and PDF-page references below.

04 · Outcome / in whose favour

In whose favour: Assessee

Revenue appeal dismissed; no costs

Final historical section 41(1) ruling

Not a present rule that unilateral write-offs can never be taxable, and not an adjudication extinguishing or enforcing any creditor’s civil claim.

Source: See the proposition-specific paragraph and PDF-page references below.

05 · AKHB REVIEW POINT

Identify the earlier allowance, the particular liability and the event said to create the benefit; do not infer cessation solely from the age of a balance. Keep the tax question separate from a civil adjudication of limitation against an absent creditor.

The later statutory boundary is essential: the checked 2011 compilation, physical page 306, includes unilateral writing-off within section 41(1) Explanation 1 and records its insertion by the Finance (No. 2) Act, 1996 with effect from 1 April 1997. The 1999 judgment’s decision date does not make its AY 1965-66 reasoning a construction of that later Explanation. Apply the correct assessment-year text and all charging conditions; no comprehensive current-law or subsequent-case certification is given.

Source: See the proposition-specific paragraph and PDF-page references below.

Proposition-specific source paragraphs and PDF pages

  • topic
    Identity, historical year and disputed book transfer
    source url
    Open cited source
    pdf pages
    1; 2; 3
    paragraphs
    Unnumbered judicial text
    source role
    reported metadata and judicial text
  • topic
    Necessary benefit and distinctions from contrary authorities
    source url
    Open cited source
    pdf pages
    4; 5; 6
    paragraphs
    Paragraphs 3–7
    source role
    judicial text
  • topic
    Creditor/limitation analysis and final dismissal
    source url
    Open cited source
    pdf pages
    6; 7; 8
    paragraphs
    Paragraphs 7–11
    source role
    judicial text
  • topic
    Later statutory write-off inclusion and stated effective date
    source url
    Open cited source
    pdf pages
    305; 306
    paragraphs
    Section 41(1), Explanation 1 and footnote 65
    source role
    bounded historical statutory text

Judicial authorship and separate opinions

Order of the Court; no individual author identified

Act identified in the reviewed source

Income-tax Act, 1961

Source & verification

Download original judgment / order · Open cited source rendition

Identified source rendition: 8 PDF pages; SHA-256 2eaafe049746ed00125548062a60a9af951ab9d07dffc7157de4c639cf6c6e3f. Original bytes preserved. Complete judicial order paragraphs 1–11, physical pages 2–8/SCR 401–407; prior-case quotations distinguished.

  • The narrated transfer of Rs 3,45,000, repaid amount of Rs 1,29,000 and addition of Rs 2,56,529 are not reconciled by the source. No arithmetic correction or hidden component is supplied.; The capital-reserve transfer in this case is not replaced with the profit-and-loss transfers discussed in other cases.; A quoted High Court passage prints “Revision” where the surrounding remission discussion makes the context clear; the note does not create a separate revisional issue.; The order’s historical tax year precedes the later unilateral-write-off Explanation, notwithstanding the 1999 decision date.; No named individual author is printed in the order.

Statutory scope

No automatic mapping to the Income-tax Act, 2025 or present-law certification. Apply the statutory text for the relevant year.

Later treatment

Source checked 2026-10-04. Comprehensive subsequent judicial and statutory treatment has not been verified. Only the expressly identified bounded comparisons have been checked. No current-law or Income-tax Act, 2025 mapping is certified.

Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.

Identified source links

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