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TMI Blog2009 (7) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the case are that the assessee is a company engaged in the production and sales of cold rolled steel coils/sheets and galvanized coils/ sheets having its plant at GIDC, Palej. The return of income was filed declaring a total loss of Rs. 14,71,77,158 for the assessment year 2002-03. In the statement of total income forming part of the said return, a note was appended that it has written back the amount of loan of Rs. 86,02,261 being waiver of principal amount of loan taken from Wipro Finance Ltd. The assessee entered into an agreement with Wipro Finance Ltd., for a loan of Rs. 3 crores. It was claimed before Assessing Officer that the loan was for the purpose of working capital. For obtaining the loan machineries were pledged as security and hypothecated to Wipro Finance Ltd. After deducting the documentary charges, bank charges etc., assessee received Rs. 70 lakhs on 19-9-1997 and Rs. 2,16,60,676 on 12-9-1997. Thus, it received a total amount of Rs. 2,86,60,676. Subsequently due to heavy losses suffered by the assessee, it was a declared as sick company by the Board of Industrial Finance and Reconstruction. It approached Wipro Finance Ltd., and other financial institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived shall not be included in the actual cost of the asset. 5. Against this, the learned AR of the assessee submitted that it is incorrect on the part of the authorities below to infer that the assessee obtained loan from Wipro Finance Ltd., for the purpose of acquiring plant and machinery. In fact finance was obtained from that company for working capital requirement and not for purchasing plant and machinery or for making payment to the suppliers of plant and machineries. The learned AR of the assessee drew our attention to page 2 of the PB wherein details of payment to the suppliers of the plant and machinery has been given, according to which the payments were made prior or after obtaining the loan from Wipro Finance Ltd. He referred to the following chart : Details of payments made to machinery suppliers Before July, 1996 to December, 1996 Rs. 9,39,86,764 Payment made at least 12 months before loan taken. January, 1997 to March, 1997 Rs. 23,72,424 Payment made at least 6 months before loan taken September, 2001 to Ooctober, 2001 Rs. 2,14,86,960 Payment made after four years from loan taken July, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 3 crores. A reading of this agreement suggests that the assessee has actually hypothecated GI Plant to Wipro Finance Ltd., for obtaining the loan. The assessee would be paying rentals to Wipro Finance Ltd., as per schedule to the agreement. The learned DR referring to this presumed that it is the Wipro Finance Ltd., which has advanced money for purchasing plant and machinery and not for working capital requirement. The hire purchase agreement as per the learned DR refers to rentals to be paid by the assessee meaning thereby assets for the time being are owned by Wipro Finance Ltd., and therefore, if a part of the loan is waived then that part will be reduced from the actual cost. We, however, do not agree with this proposition. For affecting the actual cost there should be either grant, or subsidy, or reimbursement against such cost. The word "waiver" is not used in Explanation 10 to section 43(1). For the sake of convenience, the same is reproduced as under : " Explanation 10. Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g) Sum paid (by Government) to companies in certain industries to enable them to sell their goods or services at a price close to the prevailing market price. A subsidy is also used to provide financial support to a commercial or quasi-commercial activity that would otherwise not be viable in narrow profit-and-loss terms, usually in order to sustain broader economic and social benefits (Business; Insurance; International Accounting)." The word "Grant" used in Explanation 10 means any sum or money paid as an aid out of the State funds or funds of any institution. The word "reimbursement" is defined as payment of what has been spent. On page 4029 of Advance Law Lexicon, it is defined as under : " Reimbursement. In ordinary parlance reimbursement means repayment of what has been spent. To reimburse is to repay what is expended ( Deepak Fertiliser Petroleum Chemicals Corpn. Ltd. v. Union of India [1996] 381 DRJ 209), The word reimbursement means and implies restoration of an equivalent for something paid or expended. It presupposes previous payment. Tata Iron Steel Co. Ltd. v. Union of India [2001] 2 SCC 41, Para 16, The act of paying back somebody for his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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