JUDGMENT judgment of court was delivered by L. Narasimha Reddy J.-The appeal and reference are interrelated and are in relation to same assessee and for same period but covering two different assessment years. Hence, they are disposed of through common judgment. Both proceedings are at instance of Revenue. respondent is company undertaking activity of manufacturing and marketing of food products. It has sister concern, by name, M/s. Ampro Industries P. Ltd. respondent used to supply raw material to its sister concern and get manufactured certain brands of biscuits. For that purpose, it used to pay conversion charges in terms of agreement entered into between them on June 30, 1982. products manufactured by or on behalf of respondent are subject to excise duty. For activity undertaken between September 27, 1982, and September 30, 1985, there existed some dispute, as to extent of excise duty. While, according to jurisdictional Commissioner of Central Excise, duty was leviable on cost of product arrived at by taking into account value of raw material supplied by respondent, conversion unit insisted that it must be only on basis of conversion charges paid to it. As provided for under rule 9B of Central Excise Rules, products were cleared at relevant period on payment of undisputed rate of duty, however, subject to execution of bond in Form B-13, undertaking to pay differential duty as may be determined by competent authority. According to agreement between respondent and conversion unit, former is under obligation to compensate or pay duty component suffered by latter. In returns submitted by respondent, deductions were claimed to extent of excise duty actually paid. So far as differential amount covered by bonds is concerned, provision was made in books of account to tune of Rs. 1,66,62,866. After about two rounds of litigation initiated by conversion unit, it ultimately emerged that it is not under obligation to pay any further amount towards excise duty for corresponding period over and above what was already paid. On other hand, it was held to be entitled for refund of Rs. 12,70,649 for conversion unit and Rs. 5,03,316 for conversion unit, vide order dated May 19, 1993, passed by Superintendent of Central Excise. In returns filed for assessment year 1992-93, deduction of Rs. 1,66,62,866 was claimed. For subsequent years claim was dropped on ground that there was neither any cessation nor any accrual on account of order dated May 19, 1993, passed by Superintendent of Excise. assessing authority, however, took view that there was no cessation on basis of order passed by Superintendent of Excise and corresponding amount being Rs. 1,66,62,866 is liable to be assessed for assessment year 1992-93. separate order was passed in respect of refund of about Rs. 18,00,000. Since that refund came only in May, 1993, benefit thereof was extended for assessment year 1994-95. respondent carried matter in appeal before Commissioner of Income-tax (Appeals). appellate authority upheld view taken by assessing authority. Further appeal in I. T. A. No. 63/Hyd/1996 was filed in relation to assessment year 1992-93 before Hyderabad Bench B of Income-tax Appellate Tribunal regarding benefit under section 41(1) of Income-tax Act, 1961 (for short, "the Act"). Through its order dated April 25, 1996, Tribunal took view that there was no cessation or remission referable to section 41 of Act as result of order dated May 19, 1993, passed by Superintendent of Excise and that corresponding amount is not liable to be brought under income-tax. Revenue filed R. A. No. 462/Hyd/1996 under section 256(1) of Act with prayer to refer certain questions to this court. request was not acceded to. Therefore, Revenue approached this court by filing I. T. C. No. 27 of 1997. same was allowed by this court on August 9, 2001, and, accordingly, following questions were referred to this court by Tribunal through detailed statement of case: "1. Whether, on facts and in circumstances of case, Tribunal was correct in law in deleting addition of Rs. 1,66,62,866 for assessment year 1992-93? 2. Whether, on facts and in circumstances of case, Tribunal was correct in holding that sum of Rs. 1,66,62,866 is contractual liability in terms of agreement between assesseecompany and conversion unit even though liability to assessee-company arises only when conversion unit pays amount to Central Excise Department? 3. Whether, on facts and in circumstances of case, Tribunal was right in holding that there was no cessation of liability when in fact liability as claimed by assessee ceased by virtue of order dated July 16, 1992, of Collector of Central Excise (Appeals) setting aside demands raised by lower authorities?" same is subject matter of R. C. No. 111 of 2001. It has been already mentioned in preceding paragraphs that benefit of refund of duty was extended to conversion unit through order dated May 19, 1993. effect thereof was not shown in return filed for assessment year 1993-94. According to respondent, it is only in subsequent assessment year, i.e., 1994-95 that amount can be adjusted or dealt with. In his order of assessment dated March 13, 1996, Assessing Officer took view that amount should have been dealt with in assessment year 1993-94 itself. Aggrieved thereby, respondent filed appeal before Commissioner of Income-tax (Appeals). appeal was allowed through order dated July 31, 1998, and contention of respondent was accepted. said order was challenged by Department in I. T. A. No. 1803/Hyd/1996. appeal was dismissed. same is challenged in I. T. T. A. No. 7 of 2002. Sri J. V. Prasad, learned counsel for appellant, submits that view taken by Tribunal that there was no remission or cessation of liability in favour of respondent cannot be sustained in law. He contends that respondent claimed deduction in preceding years of assessment at time when dispute was pending before authorities under Central Excise Act and once competent authority held that liability to that extent no longer exists amount ought to have been brought under purview of tax. He further submits that conclusions recorded in paragraph 22 of order of Tribunal in I. T. A. No. 62/Hyd/1996 do not reflect actual area of controversy nor does it according to law. Sri Y. Ratnakar, learned counsel for respondent, submits that though Assistant Collector passed order on February 19, 1992, actual determination of liability had taken place only on May 19, 1993, when Superintendent of Excise passed consequential order. He contends that cessation of liability could not be reflected in returns for assessment year 1993-94 on account of fact that clear picture did not emerge and respondent was entitled in law to mention same in assessment year 1994-95. He further submits that refund of amount of about Rs. 18,00,000 has also taken place in same assessment order and Tribunal has taken same into account. Learned counsel submits that all questions framed in order of reference as well as substantial question framed in appeal deserve to be answered against Revenue. Before proceeding further, it becomes necessary to take note of last paragraph of order passed by Tribunal in I. T. A. No. 63/Hyd/ 1996.It reads: "22. Considering totality of facts and circumstances of case and legal position that emerges from above discussion, we are of considered opinion that there was neither cessation nor remission of assessee's liability under its contract with conversion unit with regard to Central excise duty payable by conversion unit and notwithstanding entries made by assessee in books of its account, lower authorities were not justified in bringing to tax said liability of Rs. 1,66,62,866 under section 41(1) of Incometax Act. We, accordingly, delete this addition of Rs. 1,66,62,866 made by Assessing Officer and sustained by Commissioner of Income-tax (Appeals) in impugned order." If this is read in isolation, it gives impression that amount of Rs. 1,66,62,866 cannot be brought into purview of section 41(1) of Act at all. In all fairness, learned counsel for respondent submitted that dispute is only about order of assessment and not total liability as such. Both proceedings arose as consequence of determination of actual quantum of excise duty payable on products manufactured by conversion unit for and on behalf of respondent. Though liability to pay excise duty is not directly that of appellant, it assumed liability in terms of agreement dated June 30, 1982, entered into between itself and conversion unit. uncertainty as to quantum of excise duty payable prevailed in assessment year 1992-93. It has already been mentioned that pending final adjudication, manufacturer, i.e., conversion unit, was permitted to pay undisputed excise duty for clearance of goods, subject to execution of bond, for differential amount. Assistant Commissioner of Central Excise has no doubt passed order dated February 19, 1992. That, however, did not result in actual determination of excise duty. He has only stipulated broad guidelines, according to which, excise duty must be determined. working out part of it was entrusted to Superintendent of Central Excise. He, in turn, completed that exercise on May 19, 1993. effect of order dated May 19, 1993, was two fold. first was that conversion unit and thereby respondent were held to be not under obligation to pay any amount covered under bonds, and thereby bonds stood discharged. second was that sum of about Rs. 18,00,000 was to be refunded from out of excise duty already paid by conversion unit. benefit of this has also accrued to respondent since it has claimed deduction on account of payment of excise duty. Notwithstanding uncertain nature of claims that were made before assessing authority and appellate authority, actual area of controversy was about year of assessment, in which both components referred to above must be adjusted or reflected. assessing authority took view that date of order passed by Assistant Commissioner of Central Excise constitutes basis and, accordingly, assessment of those components must be for assessment year 1992-93. appellate authority also has taken same view. Section 41 (1) of Act gets attracted in facts of present case. provision reads: "41. Profits chargeable to tax.-(1) Where allowance or deduction has been made in assessment for any year in respect of loss, expenditure or trading liability incurred by assessee (hereinafter referred to as first- mentioned person) and subsequently during any previous year,- (a) first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, amount obtained by such person or value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as income of that previous year, whether business or profession in respect of which allowance or deduction has been made is in existence in that year or not; or (b) successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by first-mentioned person or some benefit in respect of trading liability referred to in clause (a) by way of remission or cessation thereof, amount obtained by successor in business or value of benefit accruing to successor in business shall be deemed to be profits and gains of business or profession, and accordingly chargeable to income-tax as income of that previous year." gist thereof is that if assessee has made any deduction towards any liability in earlier assessment years and such liability has either ceased or any remission was made, same must be brought under net of income-tax in subsequent assessment year. Part of discussion undertaken by Tribunal as well as Commissioner gives impression that respondent was objecting to very application of section 41 of Act in relation to benefit that accrued to it on account of order dated May 19, 1993, passed by Superintendent of Excise. However, on close analysis, it becomes clear that effort made by respondent was only to convince authorities under Act to permit it to reflect that in assessment year 1994- 95 and earlier year. emphasis of Income-tax Officer as well as Commissioner of Income-tax (Appeals) was on date of order passed by Assistant Collector, i.e., April 27, 1992. It may be true that adjudication, as such, under Central Excise Act vis-a-vis conversion unit has taken place only in hands of Assistant Commissioner. Had it been case where Assistant Commissioner determined quantum of excise duty, view taken by Income-tax Officer could have been accepted. It has also been mentioned that Assistant Commissioner, Central Excise, did nothing more than indicating parameters for determining or reckoning excise duty. To be precise, he directed that nearest comparable unit must be taken as basis for determining excise duty for products manufactured by conversion unit. Barring that, he did not undertake any calculation or reckoning. It was only Superintendent of Central Excise that had undertaken entire exercise. He identified M/s. Super Food Products, as comparable unit and passed order on February 19, 1995, indicating exact amount of excise duty payable on products manufactured by conversion unit. resultant figures not only lead to waiving of amount covered by bonds but also refund of amount to tune of Rs. 18,00,000. Once respondent is relieved of liability to pay amount covered by bonds, section 41(1) of Act gets attracted and liability can be said to have ceased. As consequence, respondent had to pay tax on amount, regarding which he cleared exemption in returns for earlier assessment years. only difference would be that since actual determination emerged only in May, 1993, it shall be under obligation to reflect same in return for year 1994-95. So is case with amount of Rs. 18,00,000, which was ordered to be refunded. Therefore, question No. 1 in R. C. No. 111 of 2001 is answered against Revenue and in favour of second respondent. Question No. 2 is answered expressing view that amount of Rs. 1,66,62,866 is liable to be dealt with under section 41(1) of Act, however, for assessment year 1994-95. Question No. 3 need not be answered in view of answers given to questions Nos. 1 and 2. For same reasons mentioned above, I. T. T. A. No. 7 of 2002 is dismissed, subject, however, to condition that amount of excise duty refunded through order dated May 19, 1993, passed by Superintendent of Central Excise, shall be dealt with in returns for assessment year 1994- 95. There shall be no order as to costs. miscellaneous petitions filed in reference case and appeal shall stand disposed of. *** Commissioner of Income-tax v. Ampro Products Ltd