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2018 (6) TMI 1049 - AT - Income TaxAddition relating to waiver of loan - Held that - It is the case of the assessee that it has presumed that the loan has been waived by UTI Bank, whereas the reply given by the UTI Bank to the AO during the course of remand proceeding revealed that the loan has not been waived. Hence, the assessee has reinstated the loan in the books of account during the financial year relevant to A.Y. 2016-17. Since the basic facts relating to the issue have undergone a change, we are of the view that this issue requires to be set aside to the file of the AO for examining it afresh. Disallowance of depreciation - Held that - Since the AO had computed short term capital gain under Section 50 of the Act, the AO disallowed depreciation claimed by the assessee. Since we have restored the issue relating to waiver of loan to the file of the AO, this issue, being consequential in nature, is also restored to the file of the AO. Consequently the order passed by the CIT(A) on this issue is set aside. Addition made under Section 41(1) - Held that - Non-compliance of notice cannot lead to the inference that the liability is no longer payable. Nothing was brought on record by the AO to prove that the above said liabilities are no longer payable. Accordingly we are of the view that that the AO was not justified in assessing the above said amount under Section 41(1) of the Act. Accordingly we set aside the order passed by the learned CIT(A) on this issue and direct the AO to delete the addition made under Section 41(1)
Issues:
1. Addition relating to waiver of loan 2. Disallowance of depreciation 3. Addition made under Section 41(1) of the Income Tax Act Issue 1: Addition relating to waiver of loan The appellant, a manufacturer and trader in steel, faced an addition to income due to a loan waiver. The appellant had reduced a loan amount from unsecured loans and Plant & Machinery due to losses and subsequent loan default. The AO treated the reduced amount as short term capital gain under Section 50 of the Act. The appellant argued that the loan waiver benefit was a capital receipt not taxable. During remand proceedings, the UTI Bank clarified that the loan was not waived, leading the appellant to reinstate the liability in its books for a subsequent year. The ITAT found that new facts emerged, necessitating a fresh examination by the AO. The ITAT set aside the CIT(A)'s order for reevaluation. Issue 2: Disallowance of depreciation The AO disallowed depreciation claimed by the appellant due to the treatment of the loan waiver as short term capital gain. Since the loan waiver issue was remanded, this issue was also sent back to the AO for reconsideration. The ITAT set aside the CIT(A)'s decision on this matter as well. Issue 3: Addition made under Section 41(1) of the Act The AO assessed an amount as remission of liability under Section 41(1) of the Act, based on non-response from parties regarding liabilities. The CIT(A) upheld this assessment. The appellant contended that the liabilities were still payable, and non-response to notices did not prove otherwise. The ITAT agreed that non-compliance with notices did not establish that the liabilities were no longer payable. As a result, the ITAT directed the AO to delete the addition made under Section 41(1) of the Act, setting aside the CIT(A)'s decision. In conclusion, the ITAT allowed the appeal filed by the assessee for statistical purposes, emphasizing the need for a fresh examination of the issues related to the loan waiver and depreciation, and directing the deletion of the addition made under Section 41(1) of the Act.
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