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TMI Blog2008 (3) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... and/or section 41(1) of the Income-tax Act being the loan of the assessee repaid by a shareholder. The issue raised by the Revenue is against the direction of the Commissioner of Income-tax (Appeals) in holding that the sum of Rs. 2.45 crores credited to the reserve account is taxable under section 28(iv) and/or 41(1) of the Income-tax Act and not under section 10(3) of the Income-tax Act. The second grievance of the Revenue is that the Commissioner of Income-tax (Appeals) erred in holding that if the receipt of Rs. 2.45 crores is taxed under section 10(3) of the Income-tax Act, the assessee is entitled to the benefit of set off of unabsorbed depreciation and consequential benefits. The brief facts of the case are that the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecember 31, 2000. The said sum of Rs. 2.45 crores was credited to the capital reserve account in the balance sheet as on March 31, 2001. The Assessing Officer included the said amount as income of the assessee under section 10(3) of the Income-tax Act under the head " Income from other sources" . The Commissioner of Income-tax (Appeals) upheld the order of the Assessing Officer, however, he observed that the benefit of Rs. 2.45 crores accrued to the assessee-company and was taxable under section 28(iv)/41(1) of the Income-tax Act. The assessee is aggrieved by the addition of Rs. 2.45 crores as income of the assessee under section 28(iv) and/or 41(1) of the Income-tax Act. The Revenue is aggrieved by the direction of the Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order to be released from its guarantee obligations. The assessee-company had borrowed a sum of Rs. 7.00 crores from the Bank of America as per the loan agreement dated January 23, 1998, placed at pages 12-32 of the paper book. During the continuance of the said loan, there were certain obligations to be fulfilled by both the shareholders. As per clause 6 : covenants of the borrower were enumerated which provided that during the tenure of this agreement, the borrower will not without the prior written consent of the bank create any charge or other security over any of the fixed or current assets in favour of any third party/ies (clause 6.1.1 of the agreement). As per clause 6.1.5, it was agreed that the borrower i.e., the assessee-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not taxable. The ratio of this decision squarely applies to the facts of our case as the assessee is not required to pay any loan either to shareholder or to BOA which amounts to waiver of loan." Similar issue arose before the Third Member Bench of the Mumbai Tribunal in ITO v. Ahuja Graphic Machinery P. Ltd. [2007] 111 TTJ 445 (Mum) and it was held as under : "The value of any benefit or perquisite arising from business, or the exercise of a profession is chargeable to income-tax as part of the income from business/profession under this section and it is deemed to be income under section 2(24) of the Act. This clause does not apply to the receipts in cash. The sum credited by the assessee to the profit and loss account of the unclaimed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 28(iv) of the Act to the facts of the case when the assessee has been acknowledging this outstanding amount as liabilities to its principal from year to year in its balance-sheet." Further, it was held as under : " Now, I shall take up the second issue whether the amounts in question are liable to be taxed under section 41(1) of the Act. I am again persuaded by the decision of the hon ble Bombay High Court in Mahindra and Mahindra Ltd. v. CIT [2003] 261 ITR 501 wherein they have categorically stated that where the assessee had not obtained any deduction in respect of expenditure or trading liability, the question of the same amount being brought to tax under section 41(1) does not arise. Now, I have examined whether the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the apex court held again that the expiry for the period by limitation prescribed under the Limitation Act could not extinguish the debt but it would prevent the creditor from enforcing the debt, has been well settled. If the principle is applied, it is clear that mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not enable the debtor to say that the liability has come to an end. Apart from that, that will not by itself confer any benefit on the debtor as contemplated by that section." The ratio laid down by the hon ble Bombay High Court in Mahindra and Mahindra Ltd. v. CIT [2003] 261 ITR 501 and followed by the Third Member Bench in ITO v. Ahuja Graphic Machinery P. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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