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TMI Blog2018 (12) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted by the AO by making the following additions: 1. Addition towards not deducting the waived interest amount of under 'one time settlement' for computing book profit u/s 115JB of the Act - Rs. 8,52,58,224/- 2. Addition towards 'waiver of working capital term loan - Rs. 2.18,00,000/- 3. When the assessee preferred an appeal before the CIT(A), the CIT(A) allowed the appeal of the assessee. 4. Aggrieved by the order of CIT(A), the revenue is in appeal before us raising the following grounds of appeal: 1) Whether on the facts and in the circumstances of the case, the CIT(A) is correct in deleting the addition of Rs. 8,52,58,224/- made towards the waiver of interest by banks under 'one time settlement' for computing book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.1. The assessee filed its original return of income on 30.09.2011 without deducting the above waived interest amount of Rs. 8,52,58,224/- for computing book profit under provisions u/s 115JB of the I.T. Act and arrived at a book profit of Rs. 2,67,57,530/-after adjusting the brought forward depreciation loss of Rs. 5.19 crores (being lower than b/fd. Business loss) Later, the assessee has realized that its case falls under Clause (vii)" of Explanation (1) of Sec.115JB. Accordingly, it has filed revised return of income on 25-03-2013 by deducting the above interest waived of Rs. 8,52,58,224/- for arriving at the book profit u/s.115JB of the Act. On the other hand, while completing the scrutiny assessment, the AO has rejected the assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aived by the bank as interest in the earlier years and interest was never allowed as deduction while computing book profit in the earlier years and hence the said decisions are squarely applies to the case of the assessee. Further, the assessee's case falls under clause (vii) of explanation (1) to section 115JB. Therefore, we do not find any infirmity in deleting the addition made on this count. This ground of appeal of the revenue is dismissed. 8. As regards ground Nos. 2 & 3 regarding the waiver of principal amount of OD of Rs. 1,98,00,000/ - and working capital of Rs. 30,00,000/-, apart from the figure of Rs. 8,52,58,224/- credited to the profit & loss account. The AO observed that since the waived amounts of OD and working capital are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) Coastal Corporation Ltd. Vs Jt. CIT (2008) 118 TTJ 563 (Visakhapatnam) . vi) Smart Talk (P) Ltd Vs ITO, Ward 8(3)(2), Mumbai (2009) 119 ITO 13 (Mumbai). 11. Considered the rival submissions and perused the material on record. With regard to ground No. 1, we notice that assessee is a sick industrial company, with effect from 10/10/2003. The scheme of revival includes the one time settlement. This clearly shows that the case of assessee falls within the clause (vii) of Explanation '1' to section 115JB of the Act. The whole scheme of reorganisation is approved by the Panel set up for this purpose, it clearly fulfils the conditions laid down in clause (vii) of explanation 1 of the section 115JB of the Act. Further, we are inclined to agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only be treated as 'capital receipt'. Moreover, it can never be routed through the P&L account as the liability waiver is towards working capital term loan. It is important to note that the working capital, no doubt, used in trading activities but this term loan is never part of Profit & Loss account. The business uses the cash flow but the cost of using the above capital is applied to P&L A/c. The funds, which are applied in the business are always treated as capital in nature. 12.2 In the present case, the waiver of working capital term loan has reduced the erosion of capital under the scheme, it will remain as capital transaction and it can never be treated as revenue. The ld. DR relied on the case of Ramaniyam Homes (supra) is disting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, the assessee has not got any deduction on account of acquisition of capital assets as the same has been reflected in the balance sheet and not in the P and L account, and also the remission of the principal amount of loan so obtained from the bank and financial institution had not been claimed as expenditure or trading liability in any of the earlier previous year. So far as waiver of interest is concerned, the assessee-company itself has treated the same either as income or has not claimed the same as expenditure in the computation of income filed before the lower authorities." 4. We see no reason to interfere with the conclusions of the Tribunal as the same have been rendered on a correct appreciation law. The principles ..... X X X X Extracts X X X X X X X X Extracts X X X X
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