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TMI Blog2019 (8) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... Billaiya, Accountant Member, And Shri Suchitra Kamble, Judicial Member For the Appellant : Shri Gautam Jain Shri Lalit Mohan For the Respondent : Shri Rinku Singh ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, These three appeals are by three different assessees against three separate orders of the Ld. CIT(A), pertaining to AY 2015-16. 2. Representatives of both sides agreed that the underlying facts in the issues are identical in respect of the all appellants. On such concession, we heard the appeal in ITA No.2320/Del/2019. 3. Briefly stated the facts of the case are that the opening capital of the assessee during the year under consideration was (-)60,49,227/- which became Rs.(-) 31,30,15,182/- at the end of the year. The Assessing Officer found that the capital of the assessee has increased by ₹ 2,91,90,644/-. When asked, the assessee explained that the main factors for increase in the capital are current year s business income of ₹ 14,63,875/- and a sum of ₹ 2,31,98,954/- which was written off out of ABN AMRO s loan account. The ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Mahindra Mahindra Mills Ltd. 404 ITR 1. 9. Per Contra, the Ld. DR strongly supported the findings of the Ld. CIT(A). 10. We have given a thoughtful consideration to the orders of the authorities below. In our considered opinion, the decision of the Hon ble Supreme Court relied upon by the Ld. AO and upheld by the ld. CIT(A) in the case of T.V. Sundaram Iyenger is misplaced and has been wrongly applied. In our considered view that applicability of section 28(iv) of the Act has been discussed by the Hon ble Supreme Court in the case of Mahindra Mahindra Mills Ltd. 404 ITR 1, wherein, the Hon ble Supreme Court has reversed the decision of the Hon ble Madras High Court in case of CIT vs Ramaniyam Homes Pvt. Ltd. 384 ITR 530. The relevant findings of the Hon ble Supreme Court read as under:- 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 g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax under Section 41 of the IT Act. The objective behind this Section is simple. It is made to ensure that the assessee does not get away with a double benefit once by way 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 te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed the respondent-assessee's appeal. The Commissioner of Income Tax (Appeals) held that the liability to repay a loan taken towards the purchase of a motor car which had ceased cannot be subjected to tax. This is for the reason that the extinguishment of the loan which was taken for the purchase of a capital asset like a motor car is not a revenue receipt. Hence, the same is not taxable. 5) The appeal by the revenue to the Tribunal on the aforesaid issue was dismissed by an order dated 13/8/2009. The Tribunal held that the cessation of liability to repay a loan taken to purchase a capital asset does not result in a revenue receipt. Further, the amount of ₹ 29.17 lacs was not taxable under Section 41(1) of the Act as the same was not an expenditure incurred in the earlier years. The issue according to the Tribunal was covered in favour of the respondent-assessee by a decision of this Court in the matter of Mahindra and Mahindra Ltd. v. Commissioner of Income Tax reported in 261 ITR 501. Consequently, the Tribunal held that amount of ₹ 29.17 lacs is not taxable either under Section 41(1) or 28(iv) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Apex Court in the matter of CIT v. T.V. Sundaram Iyengar and Sons Ltd. 222 ITR 344 held that the loan was received by the assessee for carrying on its business and therefore, not a loan taken for the purchase of capital assets. Consequently, the decision of this Court in the matter of Mahindra and Mahindra Limited (supra) was distinguished as in the said case the loan was taken for the purchase of capital assets and not for trading activities as in the case of Solid Containers Limited (supra). In view of the above, the decision of this Court in the matter of Solid containers Limited (supra) will have no application to the facts of the present case and the matter stands covered by the decision of this Court in the matter of Mahindra Mahindra Limited (supra). The alternative submission that the amount of loan written off would be taxable under Section 28(iv) of the Act also came up for consideration before this Court in the matter of Mahindra Mahindra Limited (supra) and it was held therein that Section 28(iv) of the Act would apply only when a benefit or perquisite is received in kind and has no application where benefit is received in cash or money. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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