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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 ..... the appeal on the following substantial question of law:- "Whether on the fact and circumstances of the case the Income Tax Appellate Tribunal was justified in holding that the provision of Section 41(1) of the Income Tax Act, 1961 is not applicable." The brief facts of the case are that the assessee is a State Industrial Investment Corporation, which was established for promoting industrial growth in the State of U.P. It is engaged in providing financial assistance to industrial units by way of equity participation, term lending and by way of loan on lease of assets. During the assessment year under consideration, the assessee-Corporation had shown non refundable interest free unsecured loan of Rs.26,02,50,000/- from the U.P. Government. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early a cessation/remission of trading liability and assessable under Section 41(1) of the Act. Lastly, he made a request that the impugned order passed by the Tribunal may kindly be set aside where the addition was deleted. On the other hand, Sri S.K. Garg, learned counsel for the assessee has justified the impugned order. He submits that the State Government is 100% shareholder in the company since the assessee is granting the loan in various forms and providing financial assistance to industrial units in the State, it often suffers loss on account of non recovery of financed money. The State Government has converted the part of the loan as non refundable interest free unsecured loan to the extent of Rs.26.03 crores. The assessee has in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or (b) the successor in business has obtained, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able interest free unsecured 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. In the instant case, the State Government is 100% shareholder in the assessee-company. In fact, the 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. When it is so, then we find no reason to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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