2017 (2) TMI 920 - AT - Income Tax

Discount received on term loan - whether the said sum is a capital receipt and not taxable in hands of the assessee? - Held that - We find no merit in the said stand of Assessing Officer where the assessee is a limited company and it has to report all its receipts as part of the Profit & Loss Account. The receipt is whether taxable or not in the hands of assessee is to be decided thereafter. The auditor had also reduced the said amount from the Written Down Value of the assets and computed depreciation accordingly. The assessee on the other hand, had disallowed the said amount from the profits of year while computing income in its hands. It is not disputed that the assessee had received the discount on loan amount, which was utilized for the purpose of investment in assets. Only because it was credited as other income in the Profit & Loss Account, would not justify its taxability in the hands of assessee. The nature of receipt has to be seen and where it is relatable to acquisition of capital asset i.e. the loan raised by the assessee was admittedly, used for purchase of capital asset, then the discount, if any, received by the assessee is capital receipt in the hands of assessee and hence, the same is not assessable to tax. Thus we hold that discount received by the assessee is capital receipt and hence, is not to be included in the total income of the assessee. - Decided in favour of assessee Deduction claimed on account of employee s contribution to PF and ESI - Held that - The said issue is squarely covered by the ratio laid down in CIT Vs. Ghatge Patil Transports Ltd.(2014 (10) TMI 402 - BOMBAY HIGH COURT) and in CIT Vs. Hindstan Organics Chemicals Ltd. (2014 (7) TMI 477 - BOMBAY HIGH COURT). Following the same parity of reasoning, we direct the Assessing Officer to allow the claim of assessee.

Summary

Issues:
1. Taxability of discount received on term loan as income chargeable to tax.
2. Disallowance of employees' contribution to Provident Fund under section 43(B) of the Income-tax Act.

Issue 1: Taxability of Discount Received on Term Loan:
The appeal concerns the addition of ?28,70,126 as income in the assessment year 2010-11. The assessee contended that the discount received on the term loan should be treated as a capital receipt and not taxable. The Assessing Officer disallowed the discount as it was not from the seller of fixed assets. The CIT(A) upheld the addition, stating that the discount was treated as revenue in the books. The Tribunal noted that the discount was received on a loan used for acquiring assets, making it a capital receipt. Referring to relevant case law, the Tribunal held that such capital receipts are not taxable. The appeal on this ground was allowed.

Issue 2: Disallowance of Employees' Contribution to Provident Fund:
The second issue involved the disallowance of ?6,29,960 being employees' contribution to Provident Fund under section 43(B) of the Act. The Tribunal directed the Assessing Officer to allow this claim based on precedents set by the Hon'ble Bombay High Court in similar cases. Citing rulings in CIT Vs. Ghatge Patil Transports Ltd. and CIT Vs. Hindstan Organics Chemicals Ltd., the Tribunal allowed the claim of the assessee. Consequently, the appeal on this ground was also allowed.

In conclusion, the Appellate Tribunal ITAT Pune ruled in favor of the assessee on both issues. The discount received on the term loan was deemed a capital receipt and not taxable income. Additionally, the disallowance of employees' contribution to Provident Fund was overturned based on established legal precedents.