2015 (7) TMI 991 - AT - Income Tax

Remission of unsecured loans - Whether could not be subjected to tax by invoking section 28(iv) of the Act - CIT(A) deleting the addition made by the AO as income u/s.2(24) r.w.s. 28(iv) - Held that - Similar issue in case of CIT(A) V/s. Jindal Equipments Leasing & Consultancy services Ltd. (2009 (12) TMI 364 - DELHI HIGH COURT) wherein it has been held that waiver / write off principal amount of loan is not taxable as benefit or perquisites u/s.28(iv) because the benefits or perquisites should be of the nature other than cash. This decision has followed the cases of Mahendra & Mehendra 2003 (1) TMI 71 - BOMBAY High Court and Alembic P. Ltd. 1980 (8) TMI 42 - GUJARAT High Court CIT(A) while granting relief to the Assessee has given a finding that the Assessee was not carrying on the business of obtaining loans and therefore the remission of loan cannot be considered to be a benefit arising out from the business. - Decided in favour of assessee.

Summary

Issues Involved:
- Appeal filed by Revenue challenging deletion of addition of Rs. 10,00,000 made by AO as income under IT Act.
- Interpretation of remission of unsecured loans under Section 28(iv) of the Act.
- Similarity in facts across three appeals leading to a common order for convenience.

Analysis:

Issue 1: Deletion of Addition of Rs. 10,00,000 as Income:
The Revenue challenged the deletion of the addition of Rs. 10,00,000 made by the Assessing Officer (AO) as income under Section 2(24) read with Section 28(iv) of the Income Tax Act. The CIT(A) had deleted this addition, holding that remission of unsecured loans could not be taxed under Section 28(iv). The Assessing Officer had added the amount of Rs. 10,00,000 as it was written off, claiming it as a trading receipt. However, the CIT(A) disagreed, stating that the loan was not traceable, and therefore, it was written off to the capital account. The CIT(A) referred to a similar case and a decision by the Delhi High Court to support the deletion of the addition. The ITAT upheld the CIT(A)'s decision based on the facts presented and the legal interpretation of the relevant provisions.

Issue 2: Interpretation of Section 28(iv) - Benefit Arising from Business:
The key point of contention was whether the remission of unsecured loans could be considered a benefit arising from the business under Section 28(iv) of the Act. The CIT(A) and the ITAT relied on previous decisions and interpretations to conclude that in the absence of evidence showing that the loan was a benefit or perquisite other than cash, the remission of the loan could not be taxed as income. The ITAT emphasized that the Assessing Officer's observation regarding the nature of the business carried out by the assessee was unsubstantiated and that the loan write-off did not constitute a taxable benefit under the provisions cited.

Issue 3: Common Order for Convenience:
Given the similarity in facts and the common issue across the three appeals filed by the Revenue, the ITAT decided to dispose of all three appeals through a common order. The ITAT upheld the CIT(A)'s decision to delete the addition of Rs. 10,00,000 in each case, citing consistent legal interpretations and precedents. The ITAT highlighted the importance of maintaining consistency in decisions based on similar factual and legal grounds.

In conclusion, the ITAT dismissed all three appeals filed by the Revenue, affirming the CIT(A)'s decision to delete the additions of Rs. 10,00,000 and Rs. 20,00,000 in the respective cases. The judgments were based on a thorough analysis of the legal provisions, precedents, and the specific circumstances of each case, ensuring a fair and consistent application of the tax laws.