2017 (4) TMI 171 - AT - Income Tax

Principal portion of loan waived by a bank assessed u/s 41(1) - provisions of sec. 28(iv) applicability - Held that - Having regard to the submissions made by the parties, we are of the view that, in the interest of natural justice, the assessee may be given one more opportunity to prove actual utilisation of loan. Further, as observed by us in the earlier paragraphs, there is confusion about the name of bank from which the loan was obtained. Further we are of the view that the assessee should be given an opportunity to explain as to why the provisions of sec. 28(iv) will not be applicable in this case. Accordingly we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining the same afresh. The assessee is directed to clarify about the name of the bank, demonstrate the actual utilisation of loan with necessary evidences to the satisfaction of the AO and to show as to how the provisions of sec. 28(iv) are not applicable. After hearing the assessee, the AO may take appropriate decision in accordance with the law. Quantum of unabsorbed depreciation & business loss brought forward from the earlier years that is eligible for set off - Held that - Respectfully following the decision rendered by Hon ble Gujarat High Court in the case of General Motors India P Ltd (2012 (8) TMI 714 - GUJARAT HIGH COURT ), we hold that the unabsorbed depreciation pertaining to AY 2000-01 should be allowed to be set off during the year under consideration. We have noticed that the AO had assessed the capital portion of loan waived by the bank as income of the assessee in AY 2008-09 and accordingly a part of brought forward unabsorbed depreciation was set off by the AO in AY 2008-09. Since the matter relating to assessment of capital portion of loan has been set aside by us to the file of the AO, we are of the view that the AO should decide the quantum of unabsorbed depreciation eligible for set off in AY 2009-10 after passing the assessment order for AY 2008-09 in the set aside proceedings. Accordingly this issue is restored to the file of the AO. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Assessment of waived loan amount as income under section 28(iv) of the Income Tax Act.
2. Eligibility of unabsorbed depreciation for set off in the assessment year 2009-10.

Assessment of Waived Loan Amount:
In the case related to the assessment year 2008-09, the appellant contested the assessment of a waived loan amount as income under section 28(iv) of the Income Tax Act. The appellant had taken a loan from a bank, which was later waived by the bank after selling the company's assets. The appellant claimed that the waived amount consisted of principal and interest portions. The appellant offered the interest portion as income but considered the principal portion as a capital receipt. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld the assessment of the principal portion as income. The appellant argued that the loan was used for acquiring capital assets, thus the provisions of section 41(1) should not apply. The tribunal, considering the principles of natural justice, set aside the order and directed the AO to re-examine the issue. The appellant was given an opportunity to prove the actual utilization of the loan and justify why section 28(iv) should not be applicable.

Eligibility of Unabsorbed Depreciation for Set Off:
In the appeal for the assessment year 2009-10, the only issue raised was the eligibility of unabsorbed depreciation for set off. The appellant had unabsorbed depreciation from the assessment year 2000-01, which the AO and the Commissioner disallowed for set off beyond the assessment year 2008-09. The tribunal referred to a similar case and a decision by the Hon'ble Gujarat High Court, which allowed unabsorbed depreciation to be carried forward without any limit. Following this decision, the tribunal held that the unabsorbed depreciation from the assessment year 2000-01 should be allowed for set off in the year under consideration. Additionally, since the assessment of the waived loan amount in the preceding year affected the set off of unabsorbed depreciation, the issue was remanded to the AO for reconsideration after completing the assessment for the previous year.

In conclusion, the tribunal allowed both appeals for statistical purposes, emphasizing the importance of following legal precedents and ensuring proper examination of the issues raised by the appellant.