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TMI Blog2015 (9) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... 15% of the interest relatable to diversion of interest bearing funds to ₹ 3.25 Crores - Decided against revenue. Addition u/s 28(iv) arising from waiver of principal amount in one time settlement - CIT(A) deleted addition - Held that:- There is no dispute on facts. Undisputedly, purpose of the loan in question is acquisition of capital assets only. The lower appellate order records a finding of fact that one time settlement scheme in question does not give rise to any revenue or trading receipt under Section 28(iv) of the Act in the nature of remission of a corresponding trading liability under Section 41(1) of the Act. It also refers to case law of hon'ble jurisdictional high court In the case of CIT v. Tosha International Ltd. (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing interest free advance to is associate concern M/s REPL. He opined that there was no commercial expediency involved therein and it had resulted in deprivation of financial sources only. He quoted history of this issue to have arisen in regular assessment framed in earlier assessment years. There is no dispute that the CIT(A) has deleted identical disallowances in the past. The Assessing Officer sought to distinguish the relevant facts for invoking Section 36(1)(iii) and treated the impugned interest outgo as unfruitful for disallowing the sum in question of ₹ 6,11,69,042/- 3. The assessee preferred an appeal. The CIT(Appeals) restricts the impugned interest disallowance @ 15% of the interest relatable to diversion of interest be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest @ 15 per cent on the advance of ₹ 3.25 crores amounting to ₹ 48.75 lakhs was held to be not allowable. Since no further advances were made out of interest bearing funds in the subsequent years, following the reasons given in A.Y.2002-03, the disallowance was restricted to ₹ 48.75 lakhs each in A.Y.2004-05 and 2005-06 respectively vide orders in ITA Nos.811 812/09- 10/A.III dated 25.10.2010. It is seen from the details given by the ld.AR for the year under consideration that no fresh advance was given by appellant to REPL during the previous year ending 31.03.2008. Hence, for the reasons stated in ITA Nos.813, 811 and 812/09- 10/A.III dated 25.10.2010 (supra), the A.O. is directed to restrict the disallowance to &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er referred to relevant loan documents and observed that the same had been obtained for servicing term loan of ₹ 9.4 crores already granted. He held that the same was a working loan to help in cost over run. This made him to invoke Section 28(iv) of the Act and include the principal amount as income resulting in the impugned addition of ₹ 2,25,13,704/-. 6. The CIT(Appeals) has accepted the assessee s arguments as under:- 6.2 I have carefully considered the facts of the case, the submission made by the ld. AR and the case laws relied upon by the A.O. The appellant has submitted that the remission in the liability related to a loan taken for acquisition of a capital asset. There was one time settlement (OTS) of the loan obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te received in kind and has no application to any transaction which involves money. The transaction in question being a loan transaction having no application with respect to section 28(iv) of the Income-tax Act, the sum in question was not income within the purview of section 2(24) of the Act. (iv) That similarly section 41(1)(a) of the Act also did not apply as it would be applicable only to a trading liability. Further, the Hon'ble Delhi High Court in the case of CIT v. Tosha International Ltd. 331 ITR 440 (Del) and Hon'ble Bombay High Court in the case of Mahindra Mahindra Ltd. v. CIT 261 ITR 501 have also decided a similar issue in favour of the assessee. Respectfully following the above decisions, I am of the consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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