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TMI Blog2019 (2) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO. We are of the opinion that such waiver of loan for acquiring capital assets cannot be taxed as perquisite u/s 28(iv) as receipt in the hand of the assessee in the form of cash on money neither can be taxed as a remission of liability under section 41(1) since such waiver of loan was not account of liability other than trading liability as rightly followed by the Learned CIT(A). However, whether such loan were utilized for acquiring fixed assets or not no such discussion was not available in the assessment order. CIT(A) directed the Learned AO to verify this particular aspect of the matter by the order impugned before us with a further direction thus in the event it is found to be correct the impugned addition to be deleted to the extent of loans utilized for capital purposes. No infirmity in the impugned order passed by the first appellate authority so as to warrant interference. The question is accordingly answered in the affirmation i.e. in favour of the assessee. - I.T.A. No. 176/Ahd/2016 And Cross Objection No.47/Ahd/2015 - - - Dated:- 31-1-2019 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER For The Appellant : Shri G. C. Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce its receipt in earlier year. Such contention made by the assessee was again reiterated by a further reply dated 16.01.2014 where it was stated that the winding up proceeding of Metrix Logistic Co. Ltd. were at the advance stage and the loan was written off on 31.03.2011. The entire amount was utilized for financing the cost of capital expenditure was also sought to be established by documentary evidences filed by the assessee before the Learned Assessing Officer. However, though the said fact was admitted by the Learned AO he further observed that while computing the total income, the assessee has deducted such amount being loan written off stating that income considered separately as capital receipt but the said receipt was not offered to tax. According to the Learned AO if the said income is treated as capital receipt then the same should have been offered for taxation as capital gain. Otherwise it should be treated as revenue income as gathered during the year under consideration. It was further pointed out by the Learned AO that when the said loan was obtained from Metrix Logistic Co. Ltd. it was rightly accounted for in the balance sheet of the assessee company as unsecured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and perused the relevant materials available on record. It appears from the record that the assessee had obtained unsecured loan from Metrix Logistic Co. Ltd. in the F.Y. 2004-05 and there were transactions of fresh loans and also repayment of above during the period of F.Y. 2004-05 to F.Y. 2010-11. Such loan was interest free and was unsecured which was obtained for the purpose of acquiring fixed assets by the company from time to time. The balance outstanding of loan amount to the tune of ₹ 2,56,86,457/- during the year under appeal was written off by the company on account of outstanding unsecured loan taken from Metrix Logistic Co. Ltd. from the books of account of the appellant company and corresponding accounting entries were passed. Such written off amount credited to the Profit and Loss account of the company is capital in nature the same was not included as income in the return of income for the year under appeal but the same was added to the total income of the assessee since not offered to tax though characterized as capital income as observed by the Learned AO. In appeal, the Learned CIT(A) relying upon the judgment passed by the Hon ble Bombay High Court in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is nothing else than depreciation. Depreciation is a reduction in the value of an asset over time, in particular, to wear and tear. Therefore, the deduction claimed by the Respondent in previous assessment years was due to the deprecation of the machine and not on the interest paid by it. 16. Moreover, the purchase effected from the Kaiser Jeep Corporation is. in respect of plant, machinery and tooling equipments which are capital assets of the Respondent. It is important to note that the said purchase amount had not been debited to the trading account or to the profit or loss account 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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