In Brief
A company collected sales tax from customers and, under a Government of Maharashtra scheme, deferred payment to the state. When the state offered to accept early payment at Net Present Value (NPV), the company paid less than the original amount owed and saved Rs. 4.14 crores. The revenue authority claimed this saving was taxable income. The Supreme Court held that the saving cannot be treated as income under Section 41 of the Income Tax Act because early payment at fair value does not constitute a remission or cessation of the liability. The company's obligation was merely discharged prematurely, not forgiven or waived, so the statutory conditions for taxing this as income were not satisfied.
The lawyer headnote and full judgment text are available to registered users.