2014 (12) TMI 259 - HC - Income Tax

Applicability of section 28(iv) - Waiver of loan - Whether the Tribunal failed to note that section 28(iv) which deals with value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession Held that - The Tribunal rightly noted that when the loan has been waived by Indya.com in favour of the assessee, the AO sought to apply section 28(iv) by terming such waiver as income of the Assessee and arising from the business of the Assessee - if section 28(iv) was applied that means the loan was treated as connected with the business of the Assessee - in earlier years the Revenue did not accept the loan transactions from Indya.com and to MBPL both as business transactions - it now cannot question or turnaround from its findings - the Tribunal commented on this conflicting stand or versions of the Revenue. Either loans should retain the character originally labeled or attached to or it should answer the term as a business loan . Assessee would be entitled to set off, in the sense that if one loan which was advanced to it has been now written off and equally the advance made by this Assessee to MBPL became non-recoverable, then, what it derives by way of loan having been shown as income and what is the amount written off by the Assessee can be adjusted against each other - because of the waiver, the liability of MBPL to repay the same would enable the Assessee to adjust a receipt or claim a set off - the Tribunal rightly concluded that the AO charged to tax receipt of waiver of loan of ₹ 116.52 crores as business income together with interest at ₹ 5.47 crores but did not allow the deduction for waiver of the loan granted to the Assessee to the tune of ₹ 139.58 crores - If both transactions are loan transactions and one part of it is treated as business income then second part could not have given a different character thus, ₹ 122 crores being the difference of the amount cannot be taken as income u/s 28(iv) came to be upheld the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Challenge to order passed by Income Tax Appellate Tribunal regarding correctness of view taken, interpretation of section 28(iv) of Income Tax Act, 1961, treatment of loan waiver as income, applicability of business income concept, consistency in loan transactions characterization.

Analysis:
1. The High Court of Bombay addressed the challenge brought by the Revenue against the order of the Income Tax Appellate Tribunal concerning the correctness of the view taken. The Tribunal's decision was under scrutiny in the context of Income Tax Appeal No.690/Mum/2009 for the Assessment Year 2005-06.

2. The primary issue revolved around the interpretation of section 28(iv) of the Income Tax Act, 1961, which deals with the value of any benefit or perquisite arising from business or profession. The case involved an Assessee engaged in the procurement and production of media programs, with the Assessing Officer adding waived loan amounts as income under section 28(iv).

3. The Assessee's return declared a loss, but the assessment determined a significant income, including loan transactions with associate concerns like Indya.com and Music Broadcast Pvt. Ltd. The Ministry of Information & Broadcasting raised concerns about loan conversions, leading to legal proceedings eventually resolved by loan waivers. The Assessing Officer treated waived amounts as income, a decision contested by the Assessee.

4. The Commissioner, relying on precedent, deleted the additions made by the Assessing Officer. The Revenue challenged this decision in Appeal, which the Tribunal upheld. The High Court, after considering arguments from both sides, found no error in the Tribunal's order justifying interference in their appellate jurisdiction.

5. The Tribunal's analysis focused on the characterization of loan transactions and the nature of the Assessee's business. It highlighted past disputes over interest income treatment and the inconsistency in Revenue's approach to loan categorization. The Tribunal upheld the Commissioner's decision based on the peculiar facts of the case and the interplay between loan waivers and business income concepts.

6. Ultimately, the High Court concluded that the Tribunal's findings were consistent with the presented material and did not warrant the identification of any substantial question of law. The Court dismissed the Appeal, emphasizing the lack of merit due to the consistent and non-perverse nature of the concurrent findings.