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TMI Blog2017 (1) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... tional High Court vide its order dated 7th September 2005. The assessee for the year under consideration filed its return of income on 31st October 2005 showing total income of Rs. 1,03,402/- comprising of business income only. Thereafter the case was selected for scrutiny and accordingly notice issued u/s 143(2) r.w.s. 142(1)of the Act were issued upon the assessee. The assessment was framed under section 143(3) of the Act at a total income of Rs. 2,77,88,569/- by disallowing the advances written off for Rs. 2,76,85,167/- only. This amount of advances were pertaining to one of the transferor/ amalgamating company i.e. Delite Spinning Mills Pvt. Ltd which was in the business of buying yarn/ cotton and getting it is processed from outside on job work basis. 3. The assessee used to get its processing work done on job work basis through some spinning Mills located at Bhagalpur. These spinning mills were having sufficient machineries for doing such processing job. Accordingly the assessee used to supply yarn/ cotton to such mills for the job work. The assessee simultaneously used to provide advance to these mills for their electricity bills and labour expenses. As per the arrangement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 36(1)(vii) read with Section 36(2) are applicable to the amount of Rs. 56,10,934/- written off as the said amount relates to sales made to the co-operative mills. The decisions of the Hon'ble ITAT, Kolkata in the case of ACIT, Cir-7, Kolkata vs. Britania Industries Ltd in ITA No. 1708 (Kol) of 2008 for the AY 2004-05 is squarely applicable to the instant case. Respectfully relying on the above decision of the Hon'ble ITAT, Kolkata and also considering the acts of the case as discussed above, I am of the opinion that the advances of Rs. 2,04,39,222/- were written off in the course of the business of the appellant company. Accordingly, the assessing officer is directed to delete (i) the addition of Rs. 2,04,39,222/- on account of advances written off and (ii) the addition of Rs. 56,10,934/- on account of amount written off in respect to sales. The written off is confirmed. Thus the appellant gets relief of Rs. 2,60,50,156/- (Rs.2,76,85,166/- - Rs. 16,35,010/-). These grounds of appeal are partly allowed." Being aggrieved by this order of ld CIT(A) both Revenue and assessee are in appeal before us. 5. The assessee is in appeal against the order of ld CIT(A) for sustai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds and/or amend or alter the grounds already taken either at the time of hearing of the appeal or before." The Revenue has raised following ground of appeal:- "1) That on the facts and in the circumstances of the case the Ld. CIT(A) erred in allowing the claim of expenditure to the tune of Rs. 2,04,39,222/- on account of irrecoverable balances written off; without appreciating the fact that such balances were not clearly revue in nature." 6. Before us the ld. AR has filed a paper book which is running from pages 1 to 108 and submitted that the advances and loan amount was given to the spinning mills in the course of business and therefore it should be allowed. The interest earned on the loan amount was offered as business income and the same was accepted. The assessee drew our attention on pages 26 to 75 of the paper book where the request and other correspondence with spinning mills were placed. On the other the ld. DR submitted that the assessee kept paying the advances in the instant case even there was disturbance in the business of the spinning mills. The assessee was aware that there is situation of lock out in the spinning mills but still it paid advances. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly entering into a forehand arrangement to ensure smooth supply of canes and that the crop does not suffer due to want of funds. The resultant loss was a revenue loss.-English Crown Spelter Co. Ltd. vs. Baker (1908) 5 Tax Cases 324, Charles Marsden & Sons Ltd. vs. IRC (1919) 12 Tax Cases 217 and Reid's Brewery Co. Ltd. vs. Male (1891) 3 Tax Cases 279 applied; Judgment of the Mysore High Court in ITRC No. 2 of 1955 dt. 7th Sept., 1959 affirmed. Loss on account of failure of crops of sugarcane growers to whom assessee advanced money, seedlings and fertilizers to be adjusted against supply of sugarcane is a revenue loss for assessee, a sugar manufacturer" From the above, we find that the advance was provided on the principal of commercial expediency and for the purpose of the business. It is settled proposition of law that in what manner the assessee should conduct his business is that left to the discretion of the assessee and the assessing officer cannot sit in the arm chair of the businessman to decide what should have been the income earned. Therefore in our considered view we do not find any interfere in the order of ld. CIT(A). Hence the ground of appeal of Revenue is dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such cases, the prompt payment of money itself brings forth a benefit in the form of an incentive or a rebate or a discount in the price of the product. We do not know why it should not happen in the case of waiver of a part of the loan. Therefore, the finding recorded in paragraph 27.1 of the decision in Iskraemeco Regent Ltd. (supra) that Section 28(iv) has no application to any transaction, which involves money, is a sweeping statement and may not stand in the light of the express language of Section 28(iv). In our considered view, the waiver of a portion of the loan would certainly tantamount to the value of a benefit. This benefit may not arise from "the business" of the assessee. But, it certainly arises from "business". The absence of the prefix "the" to the word "business" makes a world of difference. 40. We shall now turn our attention to the distinction sought to be made between the waiver of a portion of the loan taken for the purpose of acquiring capital assets on the one hand and the waiver of a portion of the loan taken for the purpose of trading activities on the other hand. 41. It appears that in so far as accounting practices are concerned, no such distinctio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the loan is shown as a capital receipt in the profit and loss account itself. These aspects have not been taken note of in Iskraemeco Regent Ltd.(supra) 44. In view of the above, the questions of law are liable to be answered in favour of the Revenue/appellant. Accordingly, they are answered in favour of the appellant/Revenue and the appeal filed by the Revenue is allowed. No costs." In the above case the waiver of the loan has been held as business income of the assessee. Following the same analogy, we find that the loan given in the course of the business is a business transaction and therefore it should be allowed for deduction while computing the business income of the assessee. Hence the issue raised by the assessee is allowed. 10. The second issue raised by assessee in inter-connected ground no. 4 to 6 is that ld. CIT(A) erred in holding that the loan liability written back has arisen in the normal course of business and therefore chargeable to tax as income. The assessee was having the amount of loan outstanding for Rs. 10,80,69,408/- due to Punjab National Bank. The assessee during the year got the same settled from the bank for Rs. 4.50 crores and the balance amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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