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TMI Blog2016 (10) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence supporting the assessee’s claim, the learned CIT (A) has rightly confirmed the action of the AO The learned CIT (A) while reaching to this conclusion has also appreciated the detailed submission of the assessee wherein it has been specifically recorded that the loan amount has been advanced to the assessee’s sister concerns can be treated as investment made with deposit with the sister concerns. Since, it is not the business activity of the assessee Company as can be seen from the records that this can be invested in the market. It has also been noted by the learned CIT (A) that the assessee was not in a position to adduce any evidence to prove that the business prospect of the assessee are inseparably linked with its sister concerns. Therefore, while rightly appreciating the order of the AO, the learned CIT (A) has confirmed the action of the AO in disallowing the interest expenses because the assessee has advanced interest-free loans to its subsidiaries without showing that there was any business exigency for the same. In view of this, we find no reason to interfere with the findings of the learned CIT (A). - ITA No.4466/Mum/2012, C. O. No.155/Mum/2013 - - - Dated:- 19- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee carried the matter in appeal before the learned CIT (A) and the learned CIT (A) after considering the facts of the case has partly allowed the appeal filed by the assessee thereby deleting the additions made by the AO on account of principal amount of loan waived for ₹ 8,41,34,321/- but sustained the action of the AO in disallowing the interest paid on borrowed loan by holding that the assessee had advanced interest-free loans to its subsidiaries/sister concerns. Aggrieved by this order of the learned CIT (A), the Revenue as well as the assessee, both is now in appeal before us on the grounds mentioned hereinabove. 3. The sole effective ground raised by the Revenue before us is that the learned CIT (A) has erred in deleting the addition of ₹ 8,41,34,321/- being disallowance of principal amount of loan waived by the lender on account of one time settlement of loan with Mafatlal Finance Co. Ltd. holding that the loan was acquired for acquisition/investment of capital assets and as such its waiver cannot be termed as revenue receipt without appreciating that in the course of the assessment proceedings the assessee failed to furnish any evidence to show that the loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt support the case of the appellant, as the appellant loan was acquired on account of making investment/acquisition of capital asset, hence the waiver of such loan account cannot be termed by any stretch of imagination as revenue receipt, as the said loan was not acquired on trading receipt, but on account of making investment in capital asset. i.e. Investment in shares, hence, the A. O. s reliance on the aforesaid judgment of jurisdictional High Court is misplaced. 4.10 Having taken note of the judgments cited by the appellant in its submission extracted as above specifically the judgment of jurisdictional ITAT in the case of King Prawns Ltd. vs. ITO, 2011 TIOL 100-ITA (Mum) and in the case of Iskraemeco Regent Ltd. vs. CIT, 2010-TIOL-776-HC-Madras, wherein the judgment of jurisdictional High Court was dealt on which the A. O. relied upon and then after in both the decision it has been specifically held that the remission or reduction of liability, which is created on capital account as the case of the appellant. Hence in the given aforesaid fact of the appellant s case, the same cannot result in a revenue receipt making it taxable u/s 28 or u/s 41 of the IT Act. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsecured loan was received in the course of business and in the present year under consideration the said loan was waived and hence, the liability ceased to exist. While arguing, the learned DR relied upon the judgment of the Hon ble Bombay High Court in the case of Solid Containers Pvt. Ltd. reported in 308 ITR 417 (Bom.). As per the said judgment also the Hon ble High Court has considered the provisions of Section 28 (iv) which reads as under:- Section 28 (iv) of the Income-tax Act, 1961 Business income value of any benefit or perquisite arising from business or exercise of profession Assessee had taken a loan from p during previous year for business purpose which was written back in relevant assessment year as a result of consent terms arrived between p and assessee Assessee claimed that said loan was a capital and, therefore, did not come under section 41(1) Assessing Officer rejected assessee s contention and held that credit balance written back was income of assessee in view of fact that it was directly arising out of business activity of assessee and, thus, was liable to tax under section 28 Commissioner (Appeals) as well as Tribunal, following decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vs Tosha International Ltd. reported in 176 Taxman 187 (Del.). Further, the learned AR submitted that regarding taxability u/s 2 (24) for any benefit, whether convertible into money or not, shall be taxed as profit gains of business or profession. He further submitted that u/s 28(iv) of the Act does not apply to cash receipt. When loan amounts to receipt in cash, it is not covered by the definition of section 28 (iv). In this connection, the learned AR relied upon the judicial pronouncement rendered in the case of CIT Vs Mafatlal Gangabhai and Co. Ltd. [219 ITR 644 (SC)] and CIT Vs Alchemic P. Ltd. [130 ITR 168 (Guj). It was further submitted by the learned AR that waiver is capital account as the loan was utilized in shares of subsidiaries and in other companies. As the said loan was not taken for assessee s trading, the write back thereof does not give any rise to any tradeable receipts. In this connection, he relied upon the decision rendered in the case of Accelerated Freeze Drying Co. Ltd. Vs DCIT reported in 31 SOT 442 (Coachin). It was further submitted by the learned AR that whenever on account of One Time Settlement the assessee becomes defaulter in repayment of loan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the parties and perused the materials placed on record. The learned CIT (A) while dealing with this issue has considered the detailed submissions as recorded in Para 5.1 to 5.3 of his order. The learned CIT (A) has also analyzed the judicial pronouncements relied upon by the assessee and has rightly come to the conclusion that the advances extended by the assessee to its subsidiaries were not for business purposes. The learned CIT (A) has also noted that the assessee has not been able to adduce any valid proof or explanation to support the contentions of the assessee. In the absence of any valid explanation/evidence supporting the assessee s claim, the learned CIT (A) has rightly confirmed the action of the AO The learned CIT (A) while reaching to this conclusion has also appreciated the detailed submission of the assessee wherein it has been specifically recorded that the loan amount has been advanced to the assessee s sister concerns can be treated as investment made with deposit with the sister concerns. Since, it is not the business activity of the assessee Company as can be seen from the records that this can be invested in the market. It has also been noted by the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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