VENKATARAMIAH, J. ( 1 ) THE assessee in this case is M|s. Mysore Agencies (P) Ltd. , Bangalore, (in voluntary Liquidation ). The assessment year is 1967-68. A total sum of Rs. 4,600 which had been debited in the books of accounts Of the assessee during the earlier years towards rent payable to its landlord, had been allowed as trading expense by the Income-tax authorities in the orders of assessment passed earlier by them. During the assessment year in, question the Liquidator of the assessee which had gone into voluntary liquidation transferred the said sum of Rs. 4,600 which had been shown as the rent payable to the landlord in the earlier, years to the profit and loss account of the year in question and trea-d it as an item of credit in its hands. The Income-tax Officer treated the said sum of Rs. 4,600 also as part of the taxable income on the basis of the profit and loss, account presumably on the ground that S. 41 (1) of the Income-tax Act, 1961 (hereinafter referred to as the ACT') was applicable. Aggrieved by the order of the Income-tax Officer the assessee filed an appeal before the Appellate assistant Commissioner of Income-tax. In the course of the said appeal, it was contended on behalf of the assessee that the said sum of Rs. 4,600 should not have been treated as part of taxable income as Sec. 41 (1) of the Act was not attracted merely because the claim of the creditor in respect of the said amount had become barred by time. The claim of the assessee was accepted by the Appellate Assistant Commissioner of Income- tax and the taxable income was reduced by Rs. 4,600. The Department questioned the correctness of that order before the Income Tax Appellate tribunal, Bangalore Bench. Several questions were urged before the tribunal by the assessee and the department. We are, however, concerned only with one of them, namely, the tax liability in respect of the above said sum of Rs. 4,600. The Tribunal held that since the period of limitation prescribed for recovering the sums amounting to Rs. 4,600 had expired and since the Liquidator of the assessee had expressed his intention to resist the claim by the landlord to recover the said amount there was cessation of the liability to the extent of Rs. 4,600. The Tribunal held that since the period of limitation prescribed for recovering the sums amounting to Rs. 4,600 had expired and since the Liquidator of the assessee had expressed his intention to resist the claim by the landlord to recover the said amount there was cessation of the liability to the extent of Rs. 4,600 and therefore, under Sec. 41 (1) the said amount was taxable. Accordingly, it allowed the appeal of the department in that regard. ( 2 ) AT the instance of the assessee the following question has been referred to us by the Tribunal under Sec. 256 (1) of the Act. "whether on the facts and in the circumstances of the case, the tribunal was right in law in holding that the sum of Rs. 4,600 was to be treated as the assessee's income under the provisions of Sec. 41 (1) of the Income-tax Act, 1961?"the following facts are not in dispute : (i) that several sums amounting to Rs. 4,600 had been treated as expenditure in the earlier orders of assessment passed by the department, (ii) that by the year 1967-68 (the assessment year) the period of limitation, for the landlord recovering the said amount had expired, and (iii) that the sum of Rs. 4,600 had been transferred to the profit and loss account of the company tr'eating it as the amount staring to its credit on, the ground that the liability of the assessee to the landlord in that regard had become barred by time. ( 3 ) SECTION 41 (1) of the Act reads as follows:"where an, allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee 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, the amount obtained by him or the 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 the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not". A reading of sub-sec. A reading of sub-sec. (1) of Sec. 41 shows that where any amount has been treated as an expenditure Or trading liability in the assessment for any year and in a subsequent year the assessee has obtained any amount. or benefit either in cash or in any other manner in respect of such expenditure or liability by way of remission or cessation theroef such amount or the value of such benefit obtained by the assessee shell be treated as income during such subsequent year. Hence, in order to bring a case under sec. 41 (1) it has to be shown, by the department that there has been a remission or cessation of the liability in question. The remission of the liability arises when the creditor voluntarily gives up the claim. In the instant case, it is not a case of remission of the liability. The cessation of such liability arises only when it ceases to exist in the eye of law for all intents and purposes. It is argued on behalf of the department that when a debt is barred by time it ceases to exist. It is difficult to agree with the above submission. When a debt becomes barred by time, the creditor would not be able to recover the amount by enforcing his right in Court but the right will not come to an end nor will the liability cease. This is not a case governed by Sec. 27 of the Limitation Act, 1963. ( 4 ) IN Salmond on Jurisprudence (Twelfth Edition), the distinction between a perfect right and an imperfect right is explained as follows:"perfect and imperfect rights. A perfect right is one which corresponds to a perfect duty; and a perfect duty is one which is not merely recognised by the law, but enforced. A duty is enforceable when an action or other legal proceeding, civil or criminal, will lie for the breach of it, and when judgment will be executed against the defendant, if need be, through the physical force Of the State. In all ordinary cases, if the law will recognise a right at all, it will enforce it. In all fully developed legal systems, however, there are rights and duties which, though undoubtedly recognised by the law, yet fall short of this typical and perfect form. In all ordinary cases, if the law will recognise a right at all, it will enforce it. In all fully developed legal systems, however, there are rights and duties which, though undoubtedly recognised by the law, yet fall short of this typical and perfect form. Examples of such imperfect legal rights; are certain claims barred by lapse of time; claims unenforceable by action owing to the absence of some special form of legally requisite proof (such as a written document); claims against foreign States or sovereigns, as for interest due on foreign bonds. In all those cases the duties and correlative rights are imperfect. No action will lie for their maintenance; yet they are, for all th'at, legal rights and legal duties, for they receive recognition from the law. The statute of limitations, for example, does not provide that after a certain time a debt Shall become extinct; but merely that no action shall thereafter be brought for its recovery. Lapse of time, therefore, does not destroy the light, but merely reduces it from the rank of one which is perfect to that of one which is imperfect. It remains valid for all purposes save that of enforcement. It may be good as a ground of defence, it may suffice to support any security given for it, and it may possess the capacity of becoming a perfect right. Money paid in satisfaction of a statutebarred debt cannot be recovered; a pledge securing the debt remains valid; and acknowledgement of the debt by the debtor will revive the creditor's right of action. All these cases of imperfect rights are exceptions to the maxim, Ubi jus ibi remedium. The customary union between the right and the right of action has been for some special reason severed, but the right survives". ( 5 ) THE above view of the learned author, in principle, has been accepted as correct by the Supreme Court in Bombay Dyeing and Manufacturing co. Ltd. , v. The State of Bombay and others, AIR. 1958 SC. 328. even though there is no reference to the above passage. In para 23 of that decision the Supreme court has observed as follows :"23. It has been already mentioned that when a debt becomes time barred, it does not become extinguished but only unenforceable in a Court of Law". 1958 SC. 328. even though there is no reference to the above passage. In para 23 of that decision the Supreme court has observed as follows :"23. It has been already mentioned that when a debt becomes time barred, it does not become extinguished but only unenforceable in a Court of Law". ( 6 ) IT is not, therefore, correct to hold that there was cessation of the liability of the assessee in respect of the said amount of Rs. 4600 by reason of the law of limitation. The Tribunal wais in error in treating the said, sum as taxable under Sec. 41 (1) of the Act. Our view receives support from the decisions of Bombay and Allahabad High Courts in Kohinoor Mills Co. , ltd. , v. Commissioner of Income-Tax, Bombay City 1 (49 ITR 578) (Born bay) and Bhagwat Prasod and Co. , v. Commissioner of Income-Tax Lucknow (99 ITR 111) (Allahabad ). ( 7 ) THE question referred to us is therefore, answered in the negative and in favour of the assessee. The assessee is entitled to costs. Advocate fee Rs. 250/ -. --- *** --- .