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TMI Blog2019 (5) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... CBDT Circular. Stands proved that finding of fact in the impugned year have reached finality. In the absence of any contrary material on record, no interference is called for. The Departmental Appeal, therefore, stands dismissed. Addition being remission of liability - capital in nature - wavier of loan - HELD THAT:- Hon ble Supreme Court in the case of Mahindra and Mahindra Ltd. [ 2018 (5) TMI 358 - SUPREME COURT] also held that Section 41(1) of the Income Tax Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter on record that the respondent has not claimed any deduction under section 36(1)(iii) of the Income Tax Act qua the payment of interest in any previous year . In the present case, the authorities below have not given any finding of fact whether the whole amount of loan had been utilised either for the purpose of acquiring a capital asset or for the purpose of business activity or trading activity. There is also no finding of fact whether assessee had claimed any deduction in respect of interest on loan in earlier years - restore the matter to re-decide the issue strictly in accordance with Law - Appeal of assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the stocks which are valued at NIL. Even the assessee-company failed to produce any valuation report in respect of stock whose value has been taken at NIL. The assessing officer was not satisfied with the explanation of assessee-company and the value of the stock taken at NIL, was taken at ₹ 67,83,579/- and addition was made to the income of the assessee. 3.1. The assessee submitted before Ld. CIT(A) that similar issue pertain to assessment year 2005-2006 also which is confirmed by the Ld. CIT(A) for want of valuation report, but, the Tribunal deleted the similar addition vide order dated 20th October, 2010. The Order of the Tribunal is re-produced in the appellate order, in which, the Tribunal has observed that there is no evidence on record to show that the items which are valued at a particular amount were sold immediately thereafter at a price higher than the price taken by assessee in the closing stock . The assessee maintained similar method of accounting for valuation of the closing stock, therefore, addition made by assessing officer and confirmed by the Ld. CIT(A), was deleted. The Ld. CIT(A) also called for the remand report from the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same assessee for the assessment year 2005-2006 dated 20th August, 2010, copy of the Order is placed on record. He has, therefore, submitted that the issue is covered in favour of the assessee. He has referred to replies filed by assessee before the authorities below. copies of which. are filed at pages-4, 18 and 19 of the paper book, in which, assessee filed complete details before assessing officer, supported by bills and details of the valuation of the stock and stock valuation report is also filed. PB-62 is letter of the assessing officer at remand proceedings, in which, assessing officer asked the assessee to file copies of the sale bills of the stock, which were sold during the year along with name and addresses of the parties, to whom stock have been sold, details of payment received, Bank entries, to support the same. He has submitted that assessee filed complete details before assessing officer as required at the remand proceedings. The assessing officer, however, did not make any adverse comments upon the same in the remand report, copy of the remand report is filed at page-59 of the PB. He has, therefore, submitted that since nothing adverse was found against the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s appeal is general in nature and therefore, needs no adjudication. Learned Counsel for the Assessee did not press Ground No.2, on which, assessee agitated addition of ₹ 6,91,274/- on account of sundry balances written off. Ground No.2 is, accordingly dismissed as not pressed. 9. On Ground No.3, assessee challenged the addition on account of sustaining the addition of ₹ 1,64,57,835/-, being remission of liability, which is capital in nature. 10. During the course of assessment proceedings, vide questionnaire, assessee-company was asked on the comments on Point-11 of Annexure to the Auditor's Report. As per comments of the Auditor on the balance sheet in Point-11, the Auditor has stated that company has defaulted in repayment of ₹ 3,62,20,020/- due to State Bank of Bikaner Jaipur. Further, it was observed from the notes of account Point-1 that during the year settlement with the State Bank of Bikaner and Jaipur was materialized and the assessee company has finally made to pay ₹ 1,97,62,195/- Accordingly, balance of ₹ 1,64,57,825/- being remission of capital account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity. If it was the intention of the Legislature to cover for all liability, then, it would not have been mentioned Trading Liability . In otherwords, in order to cover all liabilities under section 41(1), the Legislature would have mentioned the word Liability only. The assessing officer has relied upon Judgment in the case of Kesari Tea Company Ltd., (supra), which deals with the issue of reversal of purchase tax liability, under which, company sum reversed the liability and without approval of the concerned Revenue Department. However, in the case of the assessee company, it has taken loan from Banker which assessee company was unable to pay back and under one time settlement, the amount was settled and excess amount was transferred to general reserve, therefore, no addition could be made. The assessee relied upon decision of the Hon ble Delhi High Court in the case of CIT vs. Jindal Equipments Leasing and Consultancy Ltd., (2010) 325 ITR 87 in which it was held as under : That one the pre-requisites for attracting the provisions of section 28(iv) is that the sum in question should be a benefit or perquisite arising in the course of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the debtor having extra cash in his hand. It is receipt in the hands of the debtor/assessee. The short but cogent issue in the instant case arises whether waiver of loan by the creditor is taxable as a perquisite under Section 28 (iv) of the IT Act or taxable as a remission of liability under Section 41 (1) of the IT Act. 12. The first issue is the applicability of Section 28 (iv) of the IT Act in the present case. Before moving further, we deem it apposite to reproduce the relevant provision herein below :- 28. Profits and gains of business or profession.- The following income shall be chargeable to income-tax under the head Profits and gains of business profession , x x x (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; x x x 13. On a plain reading of Section 28 (iv) of the IT Act, prima facie, it appears that for the applicability of the said provision, the income which can be taxed shall arise from the business or profession. Also, in order to invoke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of deduction and another by not being taxed on the benefit received by him in the later year with reference to deduction allowed earlier in case of remission of such liability. It is undisputed fact that the Respondent had been paying interest at 6 % per annum to the KJC as per the contract but the assessee never claimed deduction for payment of interest under Section 36 (1) (iii) of the IT Act. In the case at hand, learned CIT (A) relied upon Section 41 (1) of the IT Act and held that the Respondent had received amortization benefit. Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time, hence, it 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. Interest is, therefore, related to the business activity and is a trading liability of the assessee. the Ld. D.R. relied upon Judgment of the Hon ble Delhi High Court in the case of Logitronics P. Ltd., vs. CIT (2011) 333 ITR 386 (Del.) in which it was held that waiver of loan taken by assessee for business activity is assessable as business income under section 41(1) of the Income Tax Act, 1961 and that when no deduction claimed in respect of loan, it is not income of assessee . The Ld. D.R, therefore, submitted that in view of the above it is seen that nature of liability which ceases to exist was a trading liability, therefore, Orders of the authorities below may be confirmed. 14. We have considered the rival submission and perused the material available on record. Section 41(1) of the Income Tax Act, 1961 provides where an allowance or deduction has been made in the assessment for any year in respect of loss expenditure or trading liability incurred by assessee and subsequently during any previous year (-) the (a) The first mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or ..... 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