2022 (7) TMI 999 - AT - Income Tax

Addition u/s 28 - Addition on account of benefit arising from business u/s 28(iv) by writing back unsecured loan - assessee has borrowed interest free money from Singhi Associates for his personal use and before the commencement of previous year, assessee has repaid it partly and outstanding amount were written back by the assessee - AO taxed this write back u/s 28 (iv) - HELD THAT - In the present case the addition has been made by the LD AO u/s 28 (iv) of The Act relying on the decision of Honourable Bombay High court in case of Solid Containers Limited 2008 (8) TMI 156 - BOMBAY HIGH COURT - We find that CIT (A) is justified in rejecting the argument of the ld AO for the reason that in that case was not at all on the issue of section 28 (iv) and thus Honourable High court did not have any occasion to consider that provision. In case of Mahindra Mahindra 2018 (5) TMI 358 - SUPREME COURT honourable SC specifically considered that provision and held that in waiver of loan , as it is not in kind but in cash, section 28 (iv) does not apply. Thus we do not find any reason to disturb the appellate order of The LD CIT (A) on this issue. We confirm his findings that the write back of loan is not chargeable as business income u/s 28 (iv) of The Act. Accordingly, Ground No 1 of the appeal is dismissed. Addition under Section 56(2) (x) - difference in sale consideration and stamp duty value of 7 properties sold - application of tolerance band limit - HELD THAT - Coordinate bench in case of Maria Fernandes Cheryl 2021 (1) TMI 620 - ITAT MUMBAI has already held that the amendment made by Introducing proviso Introduction of tolerance band of 5 % and later on 10 % applies with effect from 1/4/2003 when the provision of section 50 C were introduced. Further introduction of tolerance band is for removing the hardship in the section. once a statutory amendment is being made to remove an undue hardship to the assessee or to remove an apparent incongruity, such an amendment has to be treated as effective from the date on which the law, containing such an undue hardship or incongruity, was introduced as held by Hon Supreme Court in Alom Enterprises 2009 (11) TMI 27 - SUPREME COURT Respectfully following the decision of the coordinate bench in Maria Fernandes Cheryl. 2021 (1) TMI 620 - ITAT MUMBAI we do not find any infirmity in the orders of the ld CIT (A) in applying the tolerance band limit of 10 % in the impugned assessment year also and thereby deleting the addition - Accordingly, Ground no 2 is dismissed.

Summary

Issues Involved:
1. Deletion of addition of Rs. 42,45,000/- under Section 28(iv) of the Income Tax Act, 1961.
2. Deletion of addition of Rs. 1,51,53,000/- under Section 56(2)(x) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 28(iv):
The first issue concerns the deletion of an addition of Rs. 42,45,000/- made under Section 28(iv) of the Income Tax Act. The facts reveal that the assessee received an interest-free loan of Rs. 1,40,00,000/- from Singhi Associates, of which Rs. 97,55,000/- was repaid by 2015, leaving a balance of Rs. 42,45,000/-. This balance was written back by mutual agreement during FY 2017-18. The Assessing Officer (AO) contended that this write-back should be taxed as a revenue receipt under Section 28(iv) of the Act, arguing that it constituted a business benefit. The AO relied on the decisions in Solid Containers Ltd. v/s DCIT and CIT v/s T.V. Sundaram Iyenger & Sons Ltd.

The CIT(A) deleted the addition, relying on the Supreme Court decision in CIT v. Mahindra & Mahindra Limited, which held that Section 28(iv) applies only to benefits received in kind, not cash. The CIT(A) found that the waiver of an unsecured loan, received in cash, did not attract Section 28(iv). The Tribunal upheld the CIT(A)'s decision, noting that the loan was for personal use, not business, and thus did not constitute a business benefit. The Tribunal distinguished the case from Solid Containers, where the loan was for business purposes. Therefore, the addition of Rs. 42,45,000/- was rightly deleted.

2. Deletion of Addition under Section 56(2)(x):
The second issue involves the deletion of an addition of Rs. 1,51,53,000/- under Section 56(2)(x) of the Act. The assessee purchased several immovable properties at a value less than the stamp duty value, leading to an addition based on the difference. The AO made an addition of Rs. 1,81,53,200/-, rejecting the assessee's contention that the difference was within a permissible tolerance band and that the stamp duty value should be considered as of the date of the allotment letter.

The CIT(A) partly upheld the addition, confirming Rs. 30,32,300/- for one property where the difference was 14.05%, but deleted Rs. 1,51,20,900/- for six properties where the difference was approximately 6%. The CIT(A) applied a 10% tolerance band retrospectively, relying on the decision in Maria Fernandes Cheryl vs. ITO, which held that the tolerance band applies from the date Section 50C was introduced.

The Tribunal upheld the CIT(A)'s decision, agreeing that the 10% tolerance band should apply retrospectively to remove undue hardship. The Tribunal cited the Supreme Court's principle that amendments removing hardship should apply from the date of the original provision. Consequently, the deletion of Rs. 1,51,20,900/- was upheld.

Conclusion:
The Tribunal dismissed the appeal of the Assessing Officer, confirming the CIT(A)'s decisions to delete the additions of Rs. 42,45,000/- under Section 28(iv) and Rs. 1,51,20,900/- under Section 56(2)(x). The judgments were based on established legal principles and judicial precedents, ensuring that the benefits received in cash and the tolerance band for property valuations were correctly interpreted.