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TMI Blog2014 (7) TMI 1244X X X X Extracts X X X X X X X X Extracts X X X X ..... t legal position and is not dependent on what stand the parties may profess. Therefore, any error or omission made in the return of income or any wrong claim in the return of income can be subject to rectification as per law. So however, in the present case, the CIT(A) has clearly established that assessee has not brought out the details of any discrepancy in anticipation of which the impugned disallowance was made by the assessee. There is no material before us, apart from generalized assertions, that the aforesaid disallowance was under any particular misconception of law or facts. The onus on this aspect is entirely on the assessee which has not been discharged, therefore, we find no reasons to interfere with the order of the authorities below. Thus, on this Ground assessee fails. - ITA No.2331/PN/2012 - - - Dated:- 25-7-2014 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER Assessee by : Mr. Rajen dra Ag iwal Department by : Mr. A. K. Modi ORDER PER G. S. PANNU, AM The captioned appeal by the assessee is directed against an order of the Commissioner of Income Tax (Appeals)-III, Pune dated 29.07.2011 which, in turn, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, it relates to an addition of ₹ 29,63,27,000/-, which according to the assessee is a capital receipt not chargeable to tax as it represents waiver of principal amount of long term loan by DEG Corporation under One Time Settlement (OTS) Scheme. 5. In order to appreciate the controversy, the following facts are relevant. The assessee company had availed loans from Corporation Bank and DEG Corporation, a financial institution of Germany in earlier years. It transpires that the appellant company was having financial stringency and was unable to repay the debts and/or the interest thereof and as a result in terms of a financial re-structuring plan the liabilities were settled by way of OTS Scheme. Bereft of other details, it would suffice to note that in terms of the OTS Scheme, assessee paid a lump-sum amount of ₹ 34.47 crores and obtained reliefs and concessions to the tune of ₹ 767.35 lacs from Corporation Bank and ₹ 29,63,27,000/- from DEG aggregating to ₹ 3730.61 lacs. After excluding the interest decapitalised of ₹ 58.56 lacs, the balance waiver amount of ₹ 3672.07 lacs was credited to the Profit Loss Account of the year under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the existing current liabilities and therefore, any subsequent waiver of the loan in the course of the business cannot be on capital account and it is liable to be assessed as revenue receipts. Accordingly, the addition of ₹ 29,63,27,000/- made by the Assessing Officer in respect of benefit of waiver of principal amount of DEG loan is hereby sustained, though on a different ground i.e. treating the same as revenue receipt. 7. As per the CIT(A), the benefit obtained by the assessee on account of waiver of principal amount of loan granted by DEG is not a capital receipt as the loan was not acquired for any specific purpose of acquisition of capital assets by the assessee. According to the CIT(A), the loan raised from DEG was initially utilized for repayment of the then existing current liabilities and therefore subsequent waiver of loan in the course of business cannot be treated as to be on capital account and instead it is liable to be assessed as the revenue receipt. Against this decision of the CIT(A), assessee is in further appeal before us. 8. In the above background, the rival counsels have made their submissions. As per the learned counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been availed subsequent to acquisition of fixed assets from Spindle Fabrik Suessen, Germany and therefore it cannot be said that the term loan was used for acquisition of capital assets. Further, a reference has been made to para 4.3.1 of the order of the CIT(A) wherein it is noted that the Preamble of loan agreement with the DEG, Germnay shows that the loan was a means of long term finance for the project and that the loan was not granted by DEG wholly and exclusively for the purposes of acquisition of capital assets. Therefore, according to the learned Departmental Representative, it cannot be said that the loan from DEG, Germany was availed for acquisition of capital assets. Therefore, according to the learned Departmental Representative, the loan having been availed for financing the entire project cost, the subsequent waiver of the principal amount of loan is a benefit of revenue nature and following the decision of the Hon ble Bombay High Court in the case of Solid Containers Ltd. vs. DCIT, 308 ITR 417 (Bom.), the CIT(A) made no mistake in treating such amount as a taxable income. 10. In reply, the learned counsel for the assessee submitted that the purpose of term loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan from DEG, Germany in the course of the financial years 1994-95 and 1995-96. The term loan from DEG, Germany has been approved by the Reserve Bank of India vide a communication dated 05th June, 1995, a copy of which has been placed at pages 75 to 79 of the Paper Book. A perusal of the said RBI approval reveals that the assessee was permitted to raise foreign currency loan from DEG, Germany for financing the import of capital equipments for manufacturing of textile spinning machinery and components. Further, even the loan agreement with DEG, Germany reflects financing of the project undertaken by the assessee of manufacturing textile spinning machinery and components thereof. The said agreement also shows that the loan raised from DEG, Germany was a long term means of finance for the purposes of funding assessee s project of manufacturing textile spinning machinery and components for textile industries. At pages 80 to 82 of the Paper Book, assessee has placed the list of machineries which have been acquired from Spindle Fabrik Suessen, Germany and the respective invoices thereof. It is noticeable from the financial statements of the assessee as on 31.03.1995 that a liability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e therefore, hold that the waiver of the principal amount of term loan granted by DEG, Germany of ₹ 29,63,27,000/- was with respect to a loan which was granted as well as utilized for purchase of capital assets, namely, plant machinery. 14. Considered in the aforesaid factual backdrop, the waiver of ₹ 29,63,27,000/- represents waiver of the principal amount of loan utilized for acquisition of capital assets and not for the purposes of trading activity and accordingly the issue is covered in favour of the assessee by the judgement of the Hon ble Bombay High Court in the case of Mahindra and Mahindra Ltd. (supra). Following the ratio of the Hon ble Bombay High Court in the case of Mahindra and Mahindra Ltd. (supra), it has to be held that the waiver of the 10 principal amount of loan granted by the DEG, Germany to the extent of ₹ 29,63,27,000/- in terms of OTS Scheme is in the nature of capital receipt not chargeable to tax. 15. In view of the aforesaid discussion, we hereby uphold the plea of the assessee and set-aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of ₹ 29,63,27,000/-. Thus, on Ground of Appeal No.1 as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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