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2019 (4) TMI 1848 - ITAT AHMEDABADProfits chargeable to tax u/s 41(1) - Waiver of loan - waiver of outstanding principal loan amount is a capital receipt or not? - HELD THAT:- Hon’ble Madras High Court in the matter of Iskraemeco Regent Ltd. [2010 (11) TMI 43 - MADRAS HIGH COURT] wherein it was held by the Hon’ble Court that Waiver of loan even though a receipt may be in connection with the business, every such receipt is not a trading receipt. Amount referable to the loan obtained by the assessee towards the purchase of capital asset did not constitute a trading receipt. Further, Section 28(iv) speaks of benefit or perquisite received in kind. The same has no application to any transaction which involves money. It was further observed that loan received for the purpose of acquiring capital assets did not constitute a trading liability and hence, Section 41(1) also has no application. If the ratio of the judgment is applied to the instant case then we can safely conclude that the waiver of principal amount of loan by IDBI to the tune of ₹ 8,07,35,116/- under one time settlement scheme though written off by the concerned bank does not constitute trading receipt, which was never claimed by the assessee as deduction does not give rise to profits chargeable to tax u/s 41(1) of the Act and thus cannot be added at all to the income of the assessee. Addition is thus hereby deleted. Thus, this ground of appeal is allowed. Disallowance of penal interest paid to Government of Gujarat - HELD THAT:- As decided in own case [2012 (11) TMI 351 - ITAT, AHMEDABAD] Observations of the CIT(A) that such late payment is against the public policy and amount paid by the same could not be allowed as deductible expenses u/s.37(1A) in view of the explanation to section 37(1), is not sustainable in /aw. The interest charged at the rate of 2% per month for delayed payment of installment by the assessee-company could not be equated with payment made against the public policy or payment made in contravention of law. We are of the considered view that the interest paid by the assessee on delayed payment of installment to the State of Gujarat is in the nature of financial charges for late payment of installment. In this view of the matter, we hold that no case of disallowance by holding the payment of penal interest as against the public policy could be made out by the department, and accordingly, the issue is decided in favour of the assessee. Disallowance of bad debts written off - whether mere write off of the bad debts in the books of account, as irrecoverable, is sufficient to claim deductions as bad debts? - HELD THAT:- In terms of Section 36(2)(i), the deduction on account of bad debts which have become bad and been written off is allowable in case the debts represents money lent in original course of business of banking or money lending which in this particular case is carried out by the assessee. The ratio of the judgment passed by the Hon’ble Apex Court in the matter of TRF Limited-vs- CIT [2010 (2) TMI 211 - SUPREME COURT] has also been followed by the Learned CIT(A) holding that the requirement of conditions with the bad debts written off as irrecoverable in the accounts of assessee has been, since, fulfilled by the assessee disallowance made by the Learned AO is not sustainable in the eye of law. Hence, deleted. - Decided in favour of assessee.
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