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TMI Blog2018 (5) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Hence, we find no force in the argument of the Revenue that the case of the Respondent would fall under Section 41 (1) of the IT Act. Section 28(iv) of the IT Act does not apply on the present case since the receipts are in the nature of cash or money AND Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under Section 36 (1) (iii) of the IT Act qua the payment of interest in any previous year. - Civil Appeal Nos. 6949-6950 of 2004 - - - Dated:- 24-4-2018 - CIVIL APPEAL No. 5320 OF 2012 CIVIL APPEAL No. 5319 OF 2012 CIVIL APPEAL No. 4435 OF 2018 (Arising out of Special Leave Petition (C) No. 20625 OF 2012) CIVIL APPEAL No. 890 OF 2012 CIVIL APPEAL No. 10169 OF 2010 CIVIL APPEAL No. 10168 OF 2010 CIVIL APPEAL No. 3624 OF 2012 CIVIL APPEAL No. 5751 OF 2011 CIVIL APPEAL No. 1214 OF 2012 CIVIL APPEAL No. 780 OF 2012 CIVIL APPEAL No. 2164 OF 2012 CIVIL APPEAL No. 4434 OF 2018 (Arising out of Special Leave Petition (C) No. 20144 OF 2012) CIVIL APPEAL No. 7951 OF 2012 CIVIL APPEAL No. 4442 OF 2018 (Arising out of Special Leave Petition (C) No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uipments were supplied by the Kaiser Jeep Corporation through its subsidiary Kaiser Jeep International Corporation (KJIC). (c) However, for the procurement of the said toolings and other equipments, the KJC agreed to provide loan to the Respondent at the rate of 6% interest repayable after 10 years in installments. For this purpose, the Respondent addressed a letter dated 07.06.1965 to the Reserve Bank of India (RBI) for the approval of the said loan agreement. The RBI and the concerned Ministry approved the said loan agreement. (d) Later on, it was informed to the Respondent that the American Motor Corporation (AMC) had taken over the KJC and also agreed to waive the principal amount of loan advanced by the KJC to the Respondent and to cancel the promissory notes as and when they got matured. The same was communicated to the Respondent vide letter dated 17.02.1976. (e) On 30.06.1976 the Respondent filed its return and shown ₹ 57,74,064/- as cessation of its liability towards the American Motor Corporation. After perusal of the return, the Income Tax Officer (ITO) concluded that with the waiver of the loan amount, the credit represented income and not a liability. Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was contended that since an amount is waived off, for which the Respondent is claiming exemption, it actually amounts to income at the hands of the Respondent in the sense that an amount which ought to be paid by it is now not required to be paid. As a result, the case of the Revenue falls within the ambit of Section 28(iv) and, alternatively within Section 41 of the IT Act. Hence, the decision of the High Court is liable to be set aside. 8) Conversely, learned senior counsel for the Respondent submitted that the Kaiser Jeep International Corporation (KJIC) supplied the toolings and the loan was given by the Kaiser Jeep Corporation (KJC), hence, these transactions were independent transactions. The only relationship, which survived after the supply of toolings, was that of a lender and borrower. The purchase of toolings was not a transaction for the purchase of goods on credit in the ordinary course of business nor could it be equated to unpaid purchase consideration to be liquidated over a period of time. 9) Further, it was also submitted that it is very clear that the amount of $650,000 provided by KJC was in fact a loan on which interest was being paid regularly from time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invoke the provision of Section 28 (iv) of the IT Act, the benefit which is received has to be in some other form rather than in the shape of money. In the present case, it is a matter of record that the amount of ₹ 57,74,064/- is having received as cash receipt due to the waiver of loan. Therefore, the very first condition of Section 28 (iv) of the IT Act which says any benefit or perquisite arising from the business shall be in the form of benefit or perquisite other than in the shape of money, is not satisfied in the present case. Hence, in our view, in no circumstances, it can be said that the amount of ₹ 57,74,064/- can be taxed under the provisions of Section 28 (iv) of the IT Act. 14) Another important issue which arises is the applicability of the Section 41 (1) of the IT Act. The said provision is re-produced as under: 41. Profits chargeable to tax.- (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (a) the first-mentioned person has obta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount in any of the assessment years. Here, we deem it proper to mention that there is difference between trading liability and other liability . Section 41 (1) of the IT Act particularly deals with the remission of trading liability. Whereas in the instant case, waiver of loan amounts to cessation of liability other than trading liability. Hence, we find no force in the argument of the Revenue that the case of the Respondent would fall under Section 41 (1) of the IT Act. 17) To sum up, we are not inclined to interfere with the judgment and order passed by the High court in view of the following reasons: (a) Section 28(iv) of the IT Act does not apply on the present case since the receipts of ₹ 57,74,064/- are in the nature of cash or money. (b) Section 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under Section 36 (1) (iii) of the IT Act qua the payment of interest in any previous year. 18) In view of above discussion, we are of the considered view that these appeals are devoid of merits and deserve to be dismissed. According ..... X X X X Extracts X X X X X X X X Extracts X X X X
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