TMI Blog2016 (1) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of the assessee is eligible for deduction u/s.80IA which the AO himself has allowed in the body of the assessment order. The returned business income has been allowed by the AO as deduction u/s.80IA as per the claim. Therefore, once a part of the interest expenditure is disallowed then the corresponding business income will go up. Therefore, request of the assessee that the AO may be directed to increase the deduction u/s.80IA(4) to the extent of disallowance u/s.14A which increases the business profit to that extent is acceptable. In this view of the matter, we set aside the order of the CIT(A) and direct the AO to delete the disallowance made u/sa.14A. Ground of appeal No.1 as well as the first issue in the additional ground raised by the assessee are accordingly allowed. Bogus share capital receipt - enhancing the income on account of alleged commission paid for obtaining bogus share capital - Held that:- We admit the additional evidences filed by Ld. Counsel for the assessee and restore this issue to the file of the AO with a direction to verify the records from the AO of Amicitia Infrastructure Pvt. Ltd. In case the investment by Amicitia Infrastructure Pvt. Ltd. in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find the facts are not discernible from the order of the AO as well as the order of the CIT(A) as to whether the amount was utilised for capital asset or for trading purpose. We therefore restore the issue of remission of R.2.33 crores by the bank to the file of the AO with a direction to decide the issue afresh in the light of the decision of the Hon’ble Bombay High Court Mahindra and Mahindra Ltd. (2003 (1) TMI 71 - BOMBAY High Court ) and in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Grounds raised by the Revenue are accordingly dismissed and the grounds raised by the assessee on this issue are allowed for statistical purposes. - ITA No. 844/PN/2013, ITA No. 848/PN/2013 - - - Dated:- 18-1-2016 - Vikas Awasthy (Judicial Member) And R. K. Panda (Accountant Member) For the Assessee : Rakesh Joshi For the Department : Divya Bajpai ORDER R. K. Panda (Accountant Member) These are cross appeals. The first one is filed by the assessee and the second one filed by the Revenue and are directed against the order dated 18-02-2013 of the CIT(A)-II, Nashik relating to Assessment Year 2009-10. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer in making an addition of ₹ 2.33 corers on account of waiver of principal loan by Sahakar Mitra Shri Chandrakant Hari Badhe Sir Urban Co. Operative Society, without considering the facts and circumstances of the case. 9. The appellant craves leave to add, amend, alter or delete the said ground of appeal. 3. Grounds raised by the Revenue are as under : 1. On the facts and circumstances of the case and in law the Ld.CIT(A)II, Nashik erred in deleting the addition on account of waiver of interest amounting to ₹ 3,78,00,000/-. The addition was made by the AO after taking into considering facts that Chandrakant Hari Badhe Sir Credit Cooperative Society after settlement of loan with assessee has waived interest which was not credited by the assessee to P L account as per system of accountancy. 2. On the facts and circumstances, of the case the order of the CIT(A)II, Nashik be cancelled and that of the A.O. be restored. 3. The appellant craves leave to add, alter, amend the grounds of appeal, if felt it necessary. 4. The assessee has also raised an additional ground which reads as under : On the facts and circumstances of the case as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest u/s.36(1)(iii) of the Act cannot be made. 8. It was submitted that the assessee had taken short term loan of ₹ 32 crores from Sahakar Mitra Shri Chandrakant Hari Badhe Sir Urban Cooperative Credit Society against Chandwad-ManmadNandgaon BOT project during A.Y. 2008-09. Of the total amount of ₹ 32 crores, the assessee has reimbursed ₹ 12.84 crores to RIL for latter s repaying its term loan of SBI, Mumbai. The assessee invested ₹ 17 crores and R.74.50 lakhs in purchasing of preference shares and equity shares respectively of RIL. It was submitted that the provisions of section 14A were not applicable as it did not receive any exempt income (dividend) on the aforesaid investment. It was submitted that RIL has invested the said amount of ₹ 17.75 crores in its subsidiary company and special purpose vehicle (SPV) PIPL as per the requirements of PWD Department of Maharashtra. Relying on various decisions it was submitted that no disallowance u/s.14A r.w. Rule 8D or u/s.36(1)(iii) of the Act can be made. 9. However, the AO was not satisfied with the arguments advanced by the assessee. He observed that out of ₹ 32 crores loan obtained for bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decisions cited before him and relying on various decisions the Ld.CIT(A) upheld the action of the AO. 13. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 14. The Ld. Counsel for the assessee submitted that the assessee has borrowed money from banks and invested the same in the special purpose vehicle. Further, assessee has not received any dividend income since no dividend has been declared by any of the special purpose vehicle companies. Referring to the decision of the Hon ble Delhi High Court in the case of CIT Vs. Oriental Structural Engineers Pvt. Ltd. vide ITA No.605/2012 order dated 15-01-2012 the Ld. Counsel for the assessee submitted that the Hon ble High Court in the said decision has upheld the order of the Tribunal wherein it has been held that the investment of ₹ 60.78 crores made in subsidiary companies are attributable to commercial expediency because as per the submissions made by the assessee it had to form special purpose vehicles in order to obtain contracts from the NHAI and the SPV was formed engaging the assessee company as contractor to execute the works awarded to them. It was accordingly held that no expenses and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions made before him and distinguishing the various decisions cited before him rejected the claim of the assessee that no disallowance is called for u/s.14A of the I.T. Act. 18. It is the submission of the Ld. Counsel for the assessee that since the investments are made in shares of the holding company who in turn has invested the amount in the subsidiary company and special purpose vehicle companies, for getting contracts from the PWD department of Government of Maharashtra, therefore, the investment was for commercial expediency and therefore no disallowance of interest is called for. It is also the alternate contention of the Ld. Counsel for the assessee that since no dividend income has been received which is exempt from tax, therefore, no disallowance u/s.14A should be made. It is also another alternate contention of the Ld. Counsel for the assessee that since the entire income of the assessee is eligible for deduction u/s.80IA(4), therefore, even if any disallowance is made the business income of the assessee will go up and therefore there will be corresponding deduction of the said amount and therefore it is revenue neutral. 18.1 We find some force in the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 because it cannot be termed as expense/interest incurred for earning exempted income. Under the circumstances, Ld. Commissioner of Income Tax (Appeals) is correct in holding that disallowance of a further sum ₹ 40,556/- calculated @ 2% of the dividend earned is sufficient. Under the circumstances, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals), hence we uphold the same. On going through the above observations we are of the view that this is merely a question of fact and does not involve any question of law much less a substantial question of law, as the Tribunal held that the expenses which have been claimed by the assessee were not towards the exempted income. The disallowance, therefore, was rightly limited to a sum of ₹ 40,556/-. The question of interpreting Rule 8-D is not in dispute and the only dispute is with regard to facts which have been settled by the Tribunal. The appeal is dismissed. 19. We also find merit in the alternate contention of the Ld. Counsel for the assessee that since assessee is entitled to deduction u/s.80IA(4), therefore, the addition, if any, has to be allowed u/s.80IA(4) and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Countship Commodities Pvt. Ltd. 85, Netaji Subhas Road, PS Hare Street, Kolkata Business 1250 - 100 125000 3 Anusuya Tradelink Pvt. Ltd. 56/1/1 Kings Road, Howara (W.B.)-711101 Business 1250 - 100 125000 4 Alembic Securities Pvt. Ltd. Block H Shri Sadashiv Chs,6 th Road, Santacrux (East), Mumbai Business 1250 - 100 125000 5 Abharani Vinimay Pvt. Ltd. 85, Netaji Subhas Road, Kolkata Business 1250 - 100 125000 6 Ziwani Bartec Pvt. Ltd. 85, Netaji Subhas Road, 3 rd Floor, PS Hare Street, Kolkata (WB) Business 1250 - 100 125000 7 Kalash Adverti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Countship Commodities Pvt. Ltd. 4. Ziwani Bartec Pvt.Ltd. 5. Punya Leather Pvt. Ltd. 6. Giltee Vincon Pvt. Ltd. He also noted that there are differences in the balances and in some cases the assessee has not given the extracts of the parties as appearing in the books of accounts. 24. The AO, therefore, vide letter dated 30-11-2011 asked the assessee to show cause as to why the amounts, as appearing in the above-mentioned accounts, shall not be added to the total income of the assessee. He noted that suddenly at 5.01pm on 05-12-2011 a letter from the above 6 parties was received through Fax stating thereunder as under : RE : Information require u/s.133(6) in case of Hari Infrastructure Pvt. Ltd. submission of information A.Y. 2009-10. Sub : Requested to give a week time. We are in receipt of your office letter, mentioned above. In this respect we are submitting the relevant papers within a week time so please do the needful and obliged. Thanking you, Yours faithfully, 25 He observed that out of the above 6 parties, 5 parties are having common address at 85, N.S. Road, Kolkata 700 001 and the other one, i.e. Maple Mercantile Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, etc. which is possible to us. The details of companies and documents collected and attached are as under : Sr. No. Name of the Allottee in Full Address of the Allottee PAN No. Co. Reg. No. No. shares allotted of Documents Enclosed (See Page No.35 to 53) Equity 1 Anasuya Tradelink Pvt. Ltd. 56/1/1, Kings Road, Howara (W.B. 701101) AAGCA4402K Co. Reg. No. 1250 Pan Card Proof ROC Inspection Receipt (35-36) 2 Kalash Advertising Pvt. Ltd. Bhandari Bunglow, Subhash Lane, Malad (West) Kumbai 400097 AADCK1331L Co. Reg.No. U22110MH2007PT C171358 1293 Pan Card, Co. Reg. Certificate ROC Inspecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not in a position to produce the parties as well as their confirmations in the following cases : Anasuya Tradeline Pvt. Ltd., Kolkata Rs.25,00,000/- Kalash Advertising Pvt. Ltd. Mumbai Rs.25,86,000/- Countship Commodities Pvt. Ltd. Kolkata Rs.25,00,000/- Ziwani Bartec Pvt. Ltd., Kolkata Rs.25,00,000/- Punya Leather Pvt. Ltd., Kolkata Rs.10,00,000/- Gilltedee Vincon Pvt. Ltd., Kolkata Rs.20,00,000/- Total Rs.1,30,86,000/- 27. It was finally stated that the assessee, to avoid further litigation and for want of peace of mind, wants to surrender the above amount of ₹ 1,30,86,000/-. The AO accordingly made addition of the above amount u/s.68 of the I.T. Act. 28. The AO further noted that the company has allotted shares to the directors and other persons of sister concerns for the year ending 2009 only on the face value and apart from the above the company has also allotted shares to unknown person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed the company for carrying out some additional work and in turn would increase the concession period suitably. Naturally the project period (i.e. the collection period) and also the profitability of our company will increase and also will be helpful in order to undertake and for the purpose of more utilization to the benefit of shareholders in terms of work and dividend. Based on the above reasons, our company issued shares at the premium of ₹ 1900/- per share and the investors also responded to the same. 29. However, the AO was not satisfied with the explanation given by the assessee. According to the AO the assessee has no reason for charging such a hefty premium and therefore it cannot be justified by it. Keeping all these facts in mind, the AO held that it is its own money. The value of share premium for 88,300 shares comes to ₹ 16,77,70,000/-. Out of it for 6543 shares the assessee has already surrendered the share value and the share premium and thus for the balance of 81,757 shares the value of share premium comes to ₹ 15,53,38,300/-. The AO, therefore, added the above amount of share premium to the total income of the assessee u/s.68 of the I.T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. In view of the above an enhancement notice was sent to the appellant on 13/12/2012 proposing to add back the entire share capital of ₹ 17,66,00,000/- including share premium introduced during A.Y. 2009-10, to its income besides enhancing its income by ₹ 52.98 lac i.e. @ 3% of ₹ 17.66 crore on account of commission paid for arranging the entries. The appellant vide letter dt. 20/12/2012 reiterated that it had proved the creditworthiness of the share applicants and genuiness of the transactions. However, the contention of the appellant stands exposed in view of the aforesaid findings in respect of the share capital transactions especially from Amicitia Infrastructure (P) Ltd. (Rs. 15 crore). The appellant's contention is therefore rejected. The entire share capital of ₹ 17,66,00,000/- is treated as bogus and added back u/s 68 of the Act. The appellant had been given a reasonable opportunity by the AO during the remand proceedings to confront the revelations made by directors of M/s. Amicitia Infrastructure (P) Ltd. and M/s. B. C. Biyani Projects (P) Ltd. Since it has been established that the appellant had paid ₹ 30 lac as commission for an entry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Anusuya Tradelink Pvt. Ltd. 56/1/1 Kings Road, Howara (W.B.)-711101 Business 1250 - 100 125000 3 Ziwani Bartec Pvt. Ltd. 85, Netaji Subhas Road, 3 rd Floor, PS Hare Street, Kolkata (WB) Business 1250 - 100 125000 4 Kalash Advertising Pvt. Ltd. Bhandari Bunglow, Subhash Lane Malad West Mumbai Business 1293 - 100 129300 5 Punya Leather Pvt. Ltd. 85, N.S. Road, Kolkata (WB) 700 001 Business 500 - 100 50000 6 Giltedee Vincon Pvt. Ltd. 85, Netaji Subhas Road, Kolkata (WB) 700 001 Business 1000 - 100 100000 35. As regards the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has relied on the statement of the persons who are not involved in day-to-day operations. The statements have also been recorded subsequently. This fact has not been dealt with properly by the CIT(A). He submitted that the CIT(A) called for the remand report vide Letter No.Nsk/CIT(A)-II/R R Appeal No.405/11-12/2012-13/241 dated 15-06-2012 Nsk/CIT(A)II/R R Appeal No.405/11/1-12/2012-13/241 dated 15-06-2012. However, the AO continued the investigations even after completion of assessment proceedings and after submitting remand report and supplementary remand report to the CIT(A). The CIT(A) has also relied on AO s report/letter dated 07-02-2013 and dated 16-01-2013. It was never confronted to the assessee. Hence, violation of principles of natural justice has been done on one hand and this sort of action by the AO as well as the CIT(A) shows that their approach was biased and to make addition in all circumstances by ignoring the overwhelming evidence submitted by the assessee to prove the identity, genuineness and credit worthiness of these transactions and to comply with all requirements of section 68 of the I.T. Act, 1961. He submitted that neither the AO nor the CIT(A) eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational Ltd. 325 ITR 25 (Punjay Haryana) 26. CIT Vs. Jay Dee Securities and Finance Ltd. 350 ITR 220 (Allahabad) 27. CIT Vs. Victor Electodes Ltd. ITA No.586/2010 (Delhi) 28. CIT Vs. Ultratech Finance Investment Ltd. ITA No.1122/2010 (Delhi) 29. CIT Vs. HLT Finance Pvt. Ltd. ITA No.1133/2010 (Delhi) 30. CIT Vs. J.J. jindal Infin Pvt. Ltd. ITA No.1507/2010 (Delhi) 31. CIT Vs. Derby Overseas Pvt. Ltd. ITA No.1497/2010 (Delhi) 32. CIT Vs. Expo Globe India Ltd. ITA No.1257/2011 (Delhi) 33. CIT Vs. M/s. Natraj Album Industries Pvt. Ltd. ITA No.15423/2010 (Delhi) 34. CIT Vs. Raghvi Finance Ltd. ITA No.1264/2010 (Delhi) 35. CIT Vs. Kamdhenu Steel Alloys Ltd. ITA No.972/2009 (Delhi) 36. CIT Vs. Bhavana Property Developers Ltd. ITA No.1039/2009 (Gujarat) 37. CIT Vs. Himatsu Bimet Ltd. ITA No.546/2009 (Gujarat) 38. CIT Vs. Ujala Dyeing Printing Mills Pvt. Ltd. ITA No.375/2008 (Gujarat) 39. CIT Vs. M/s. Goyal Synthetics Pvt. Ltd. ITA No.498/2010 (Gujarat) 40. CIT Vs. M/s. Aks Alloys Pvt. Ltd. ITA No.495/2011 (Madras) 41. CIT Vs. Akj Granites Pvt. Ltd. 212 CTR 25 (Rajasthan) 42. CIT Vs. M/s. Sanchati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of 6 companies were received back unserved. After the same was brought to the notice of the assessee and on subsequent confrontation the assessee surrendered the share capital received from the following companies : 1 Countship Commodities Pvt. Ltd. 85, Netaji Subhas Road, PS Hare Street, Kolkata Business 1250 - 100 125000 2 Anusuya Tradelink Pvt. Ltd. 56/1/1 Kings Road, Howara (W.B.)-711101 Business 1250 - 100 125000 3 Ziwani Bartec Pvt. Ltd. 85, Netaji Subhas Road, 3 rd Floor, PS Hare Street, Kolkata (WB) Business 1250 - 100 125000 4 Kalash Advertising Pvt. Ltd. Bhandari Bunglow, Subhash Lane Malad West Mumbai Business 1293 - 100 129300 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 08-03-2013, which is after the date of order of the CIT(A), has accepted such investment in shares with premium of ₹ 1,900/- per share of the face value of ₹ 100/-. So far as the shares invested by the other companies are concerned, it is the submission of the Ld. Counsel for the assessee that since the voluminous details filed by the assessee have not been properly appreciated by the lower authorities and since the statements recorded at the back of the assessee were not confronted to the assessee, therefore, no addition can be made u/s.68 of the I.T. Act. According to the Ld. Counsel for the assessee addition, if any, can be made in the hands of the bogus shareholders whose details such as name and address, PAN number etc were given to the AO and no addition can be made in the hands of the assessee. 46. So far as the investment in share capital of the assessee company by Amicitia Infrastructure Pvt. Ltd. is concerned we find the AO of Amicitia Infrastructure Pvt. Ltd. has considered the investment by it in the shares of the assessee company and has not made any addition in the order passed u/s.143(3)/147 dated 08-03-2013. Relevant order of the AO which is passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted. 3) Considering the facts of the case of the statements made, it is observed that amount has been received as loan from B.C. Biyani Projects Pvt. Ltd., Bhusawal, which has been utilized for purchase of share in Hari Infrastructure Pvt. Ltd. at a premium of ₹ 1,900/- per share. Although, the sources of funds have been explained as funds having received from B.C. Biyani Projects Pvt. Ltd., at the same time the transaction of received funds from B.C. Biyani Projects Pvt. Ltd., cause applicability of provision of Sec.2(22)(e) of the I.T. Act, 1961 in the cases of Directors Shri Manoj B. Biyani and Shri Vinod B. Biyani who have substantial interest in the company B.C. Biyani Projects Pvt. Ltd. The concerned AO is being intimated of the facts of the case for initiating proceedings u/s.2(22)(e) of the I.T. Act, 1961 in the case of Directors holding substantial interest in the company B.C. Biyani Projects Pvt. Ltd., Bhusawal. 47. Since this is an additional evidence filed before us and since the lower authorities had no benefit of this assessment order, therefore, we admit the additional evidences filed by Ld. Counsel for the assessee and restore this issue to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety. The society after settlement with the assessee has waived interest of ₹ 3.78 crores and principal amount of ₹ 2.33 crores. The AO, therefore, asked the assessee to explain as to why the above-mentioned waiver of interest and principal amount should not be charged to tax. The assessee vide letter dated 07-12-2011 replied as under : As regards waiver of loan of ₹ 2.33 cr. from Society Loan : a. As per the instruction of the Commissioner of Cooperative Society, Pune, the company has repaid in full ₹ 24.75 crores to Society against the principal outstanding balance of ₹ 27.08 crores. The balance principal amount of ₹ 2.33 crores is waived by society. b. Apart from waiver of ₹ 2.33 crores the society has also waived ₹ 3.78 crores charged towards interest on loan from the beginning till date of closure of account. The company has not recorded interest of ₹ 3.78 crores in the books of accounts. c. The amount of ₹ 2.33/- has been reduced by the company from the opening balance of B.O.T. Project Cost. It is submitted our company has taken and utilized the loan for construction of B.O.T. Project, which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 crores is not taxable since the same had not been claimed by the assessee as expenditure in its profit and loss account. He accordingly deleted the amount of ₹ 3.78 crores and sustained ₹ 2.33 crores only. The relevant observation of the CIT(A) at Para 37 of the CIT(A) read as under : 37. As regards appellant's ground nO.5 in regard to addition of ₹ 3.78 crore and ₹ 2.33 crore on account of waiver of interest and principal, respectively by Sahakar Mitra Shri Chandrakant Hari Badhe Sir Urban Cooperative Society, Varangaon, I find that the appellant had taken short term loan of ₹ 32 crore from Sahakar Mitra Shri Chandrakant Hari Badhe Sir Urban Cooperative Society, Varangaon against Chandwad-ManmadNandgaon BOT (Phase I) during A.Y. 2008-09. Of the total amount of ₹ 32 crore, the appellant is stated to have reimbursed ₹ 12.84 crore to RIL for latter's repaying its term loan of SBI, Mumbai. The appellant invested ₹ 17 crore and ₹ 74.50 lac in purchasing of preference shares and equity shares, respectively of RIL. Chandrakant Hari Badhe Sir Urban Cooperative Society after settlement had waived interest of ₹ 3.78 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. So far as the waiver of interest amounting to ₹ 3.78 crores is concerned we find the Ld.CIT(A) has given a finding that the interest of ₹ 3.78 crores charged since from the date of obtaining of the loan till the date of closure of the account was not debited by the assessee in the profit and loss account. It has not been claimed in the computation statement also. Therefore, when such interest was not debited in the books of account, waiver of interest by the bank will not lead to taxable income in the hands of the assessee. In our opinion, when any expenditure is neither debited to the profit and loss accounts nor claimed as a deduction cannot be disallowed by the AO. Since the Ld.CIT(A) after recording that the assessee has neither debited the interest in the profit and loss account which was waived by the bank nor claimed the same as deduction has deleted the addition made by the AO, therefore, in absence of any distinguishable feature brought to our notice by the Ld. Departmental Representative, we find no infirmity in the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the Hon ble High Court observed as under : Findings : At the very outset, we wish to point out three facts which are undisputed : (a) that a loan was advanced by KJC to the assessee, (b) that the assessee had paid interest at 6 per cent. per annum for ten years being the period of contract, (c) that the assessee never got deduction for payment of interest under section 36(1)(iii) or under section 37 of the Act. These three facts are not disputed by the Department. Therefore, we are required to consider the applicability of the provisions of sections 28(iv) and 41(1) of the Act in the light of the abovementioned three undisputed facts. (A) On section 28(iv) : At the outset, we wish to clarify that this judgment is confined to the facts of this case. This is because the value of any benefit or perquisite arising from business, as contemplated by section 28(iv), could accrue in numerous ways. The income which can be taxed under section 28(iv) must not only be referable to a benefit or perquisite, but it must be arising from business. Secondly, section 28(iv) does not apply to benefits in cash or money (see CIT v. Alchemic Pvt. Ltd. [1981] 130 ITR 168 (Guj)). Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was unexpected. In the circumstances, one fails to understand how such waiver would constitute business income. (B) On section 41(1) : Alternatively, it was argued on behalf of the Department that in this case waiver constituted remission of trading liability and, therefore, section 41(1) stood attracted. We do not find any merit in this argument. Firstly, in the present case, the prerequisite of section 41(1) is not applicable. In order to apply section 41(1), an assessee should have obtained a deduction in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. In this case, the assessee has not obtained such allowance or deduction in respect of expenditure or trading liability. It is not disputed that the assessee has paid interest at 6 per cent. over a period of ten years to KJC on ₹ 57,74,064. In respect of that interest, the assessee never got deduction under section 36(1)(iii) or section 37. In the circumstances, section 41(1) of the Act was not applicable. Secondly, even assuming for the sake of argument that the assessee had got deduction on allowance even then section 41(1) was not applicable because such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be included as income under section 41(1) of the Act. Lastly, it is important to bear in mind that the toolings constituted capital asset and not stock-in-trade. Therefore, taking into account all the above facts, section 41(1) of the Act is not applicable. In the circumstances the above questions are all answered in the affirmative, i.e., in favour of the assessee and against the Department. This disposes of Reference Application No. 1709 of 1982 filed by the Department. Reference Application No. 1708 of 1982 filed by Department : The learned advocates on both sides have informed us that the questions falling under Reference Application No. 1708 of 1982 stand covered by various judgments of our court. Accordingly, we answer the following questions. (i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to deduction of 100 per cent. of the initial contribution made to approved superannuation fund ? Answer : In view of the judgment of the Supreme Court in the case of CIT v. Sirpur Paper Mills [1999] 237 ITR 41, the abovesaid question No. (i) is answered in the affirmative, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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