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TMI Blog2013 (7) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... secured loan, it remain part of the capital account as appears from the balance-sheet of the assessee. The assessee has merely changed the description of the loan as per the direction of the State Government and no way it has treated it as a revenue receipt in its books of account - present case is regarding the conversion of the capital of one amount to another amount. So, conversion cannot be taxed, only when specifically provided in a book of statute, but there is no provision in the Act that on conversion of one capital from another capital will be treated as revenue receipt - Decided against Revenue. - Income Tax Appeal No. - 125 of 2008 - - - Dated:- 23-7-2013 - Hon'ble Rajiv Sharma And Hon'ble Dr. Satish Chandra,JJ. For the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being satisfied, the Department has filed the present appeal. With this background, Sri D.D. Chopra, learned counsel for the Department, at the strength of written submission had justified the order passed by the AO. He submits that the intention of the assessee was to get this loan amount into profit loss account, hence, the conversion of loan into non refundable interest free unsecured loan is of revenue amount. So it is taxable. He further submits that State Government is 100% shareholder in the assessee-company and there is no outside participation in the equity, the only way the State Government can recoup the loss is either to increase the share capital of the assessee or to grant another loan. The State Government had granted loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here must be some income. For this purpose, he has relied on the ratio laid down in the case of CIT vs. Sahara India Savings Investment Corporation Ltd., (2003) 264 ITR 646 (All). After hearing both the parties and on perusal of the record, it appears that the controversy is pertaining to the applicability of Section 41(1) of the Act on a sum of Rs.26.03 crores which was converted by the State Government i.e., non refundable interest free unsecured loan. Section 41(1) of the Act on reproduction, reads as under:- "41. Profits chargeable to tax.-(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts. Explanation 2.--For the purposes of this sub-section, "successor in business" means,-- (i) where there has been an amalgamation of a company with another company, the amalgamated company; (ii) where the first-mentioned person is succeeded by any other person in that business or profession, the other person; (iii) where a firm carrying on a business or profession is succeeded by another firm, the other firm; (iv) where there has been a demerger, the resulting company". In the instant case, no claim of loss expenditure of trade liability was made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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