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TMI Blog2016 (3) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹.5,77,40,964/- representing waiver of refinance loan of National Housing Bank has not been considered both for normal computation and for the purpose of computation of book profit under section 115JB of the Act. Since the waiver of loan is nothing but income of the assessee within the meaning section 28(iv) of the Act, and the same was availed during the course of regular business, the waiver of the principal portion of the loan clearly forms benefits assessable to tax under section 28(iv) of the Act. Therefore, the reliance placed by the assessee in the case of Iskraemeco Regent Ltd. v. CIT (2010 (11) TMI 43 - Madras High Court) has no application to the facts of the present case. CIT(A) confirmed the addition made by the Assessing Officer rightly - Decided against assessee - I.T.A.No.1626/Mds/2014 - - - Dated:- 3-2-2016 - Shri A. Mohan Alankamony, Accountant Member and Shri Duvvuru RL Reddy, Judicial Member For The Appellant : Shri S. Swaminathan, C.A. For The Respondent : Dr. B. Nischal, JCIT PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the assessee, and subsequently during any previous year if the assessee has obtained, whether in cash or in any other manner, any amount in respect of such loss, expenditure or trading liability or by way of remission or cessation thereof, then the same is income of that previous year. The waiver amount is not related to any loss, expenditure or trading liability which was allowed as deduction in the computation of income of any of the earlier year and it represents only the waiver of principal amount which was not allowed as deduction in the assessment of any previous years. It is submitted that the same is not income under section 41(1) of the Income Tax Act, 1961. 4. After considering the submissions of the assessee, the Assessing Officer has held that the income of ₹.5,77,40,964/- by way of waiver of refinance loan of National Housing Bank is earned during the course of regular business activity, the same forms part of business income in terms of the provision of section 28(iv) of the Act and not under section 41(1) of the Act and accordingly, he disallowed the above amount and added back to the total income of the assessee. As far as computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹.5,77,40,964/- both under the regular provisions of the Act and under section 115JB of the Act on account of waiver of loans by the National Housing Bank. The National Housing Bank, during the financial year 2004- 05 waived a refinance loan of ₹.5,77,40,964/- (principal portion). However, the assessee in its return of income has not included the same in its computation of taxable income. Since the assessee is engaged in financing business, any benefits on account of waiver of loans will be assessable to tax under the head income from business. Therefore, the Assessing Officer brought the same to tax by adding it to the assessee s income both under the regular provisions of the Act and under section 115JB of the Act. On appeal, after considering the submissions of the assessee and also considering the facts of the case, the ld. CIT(A) has observed as under: 4.2. I have considered the assessee's submissions as well as the contents of the assessment order. It is well settled law that if the loan was taken for acquiring the capital asset, waiver thereof would not amount to any income exigible to tax. On the other hand, if this loan was for trading purpose and wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the regular course of business and for the purposes of business of the assessee, the waiver of the loan directly becomes the benefit accrued to the assessee and accordingly becomes liable for tax u/s.28(iv) of the Act. In addition, since it was a trading loan transaction, the waiver also can be brought to tax u/s.41(1) of the Act. For this purpose, reliance is placed on the decision of the Bombay ITAT in the case of Bombay Gas C. Ltd v. Addl. CIT (54 SOT 13)(Mum.), where it was held that waiver of loan taken for business purposes is liable for tax u/s.41(1) of the Act. The head note of the said decision is as under - Bombay Gas Co. Ltd. v. Addl. CIT [2012] 54 SOT 13 (Mumbai) Section 41 (l) of tire Income-tax Act, 1961:- Remission or cessation of trading liability - Assessment year 2004-05 - Whether when loan is taken for acquiring capital asset, waiver thereof would not amount to any income exigible to tax; on other hand. if loan is for trading purpose and has been treated as such from very beginning in books of account, waiver thereof may result in income, more so when it is transferred to profit and loss account - Held, yes Further reliance is also placed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of regular business of the assessee and during the course of regular business, the present waiver of the principal portion of the loan clearly forms a benefits assessable to tax u/s. 28(iv) of the Act and also u/s 41(1). Therefore, the addition of ₹ 5,77,40,964/- made by the Assessing Officer on account of waiver of loan by the National Housing Bank, is justified and confirmed. 10. After carefully going through the order of the ld. CIT(A), the ld. CIT(A) has opined that if any housing loan advanced by the assessee to any customer becomes bad, the same can be claimed as bad debt, either under section 36(1)(vii) or under section 28 of the Act, as the said loans are during the course of ordinary business of the assessee. Similarly, any refinancing loans received by the assessee, as the source for loans advanced by it, ceases to exist by way of remission or waiver, etc., the same will become the income of the assessee under section 28(iv) of the Act. Thus, the waiver of principal portion of the refinance loan by the National Housing Bank is a value of benefit accrued to the assessee under section 28(iv) of the Act. 11. The ld. Counsel for the assessee placed strong re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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