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TMI Blog2019 (10) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that part of the working capital loan has been utilized for acquisition of capital goods. We find that in this regard there is no clear cut finding by the assessing officer. In the case of Kapurchand Shrimal [ 1968 (8) TMI 16 - SUPREME COURT] has expounded that it is the duty of the appellate authority to correct the error in the orders of the authorities below and remit the matter for reconsideration with or without direction unless prohibited by law. In the present case accordingly we remit the issue to the file of assessing officer. The assessing officer is directed to give a finding on the utilisation of the working capital loan which has been waived by the bank and thereafter decide as per law. Accordingly the issue is remitted to the file of Assessing Officer with the above direction. X X X X Extracts X X X X X X X X Extracts X X X X ..... at the issue involved is covered in favour of the assessee as the assessee has not earned any exempt income. Reference in this regard may be decision of honourable Supreme Court in the case of Maxopp Investment Ltd vs CIT, New Delhi the Hon. Supreme Court in Civil Appeal 104-109 of 2015 dated 12.02.2018. 7. Another common issue raised is treatment of waiver of the amount of principal loan for working capital. 8. The issue involved here is treatment of principal amount of working capital loan waived by the central bank and IDBI Bank as the income of the assessee. For treating these waivers as income of the assessee the assessing officer has relied upon the decision of honourable jurisdictional High Court in the case of solid containers limited (308 ITR 417). 9. Upon assessee's appeal learned commission of income tax appeals deleted the addition by placing reliance upon the CIT(A) order for assessment year 2009-10. The learned CIT(A) quoted the following from that order:- "I have also perused the decision of IT AT Mumbai Bench in the matter of Cipla Investments Ltd. and also of Hon'ble Madras High Court in the case of Iskraemeco Regent Ltd. which holds similar view as h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... previous year for business purposes which was returned back, as a result of consent terms arrived at between M/s. P.S. Jain Motors on the one hand and the Assessee on the other. The Assessee claimed that the said loan was the capital receipt and has not been claimed as deduction from the taxable income as expenses and therefore, did not come under section 41(1). As already noticed, this contention was rejected by the Assessing Officer on the ground that credit balance returned back is the income of the Assessee in view of the fact that it is again directly arising out of the business activity of the Assess and was liable to tax under section 28 of the Act. The order was appealed against. Commissioner partially allowed the appeal. Aggrieved from the order of the Income Tax Commissioner (Appeals), further appeal was preferred before the Income Tax Appellate Tribunal which again allowed the appeal on other counts but on the above issue and while relying upon the judgment of the Supreme Court in the case of Commissioner of Income Tax, Madurai v. T.V. Sundaram Iyengar and Sons Ltd., (1996) 6 SCC 294, sustained the view taken by the Commissioner. The Tribunal held as under: "8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to its profit and loss account. The moneys had arisen out of ordinary trading transactions. Although the amounts received originally were not of income nature, the amounts remained with the assessee for a long period unclaimed by the trade parties. By lapse of time, the claim of the deposit became time- barred and the amount attained a totally different quality. It became a definite trade surplus. Atkinson, J. pointed out that in Tattersall case no trading asset was created. Mere change of method of bookkeeping had taken place. But, where a new asset came into being automatically by operation of law, common sense demanded that the amount should be entered in the profit and loss account for the year and be treated as taxable income. In other words, the principle appears to be that if an amount is received in course of a trading transaction, even though it is not taxable in the year of receipt as being of revenue character, the amount changes its character when the amount becomes the assessee's own money because of limitation or by any other statutory or contractual right. When such a thing happens, common sense demands that the amount should be treated as income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Loss Account of the Assessee. 4. In view of the above settled position of law and the facts of the present case, we are of the considered view that no question of law much less substantial question of law arises for consideration in the present appeal. Appeal dismissed in limine. 14. We note that in the above said decision honourable jurisdictional High Court has placed reliance upon the decision of honourable Apex court in the case of T.V. Sundaram Iyengar & Sons Ltd. (supra) which was rendered by the larger bench comprising 3 of their Lordships. 15. We further note that honourable of Apex court in the case of content Electric Ltd supra has dismissed the SLP against the order of Hon'ble Karnataka high court. In that case in view of losses suffered by assesseecompany the operations of the company were funded by way of unsecured loans from DRL from year to year. During the year under consideration part of the unsecured loan was converted into equity share capital and balance was waived. The assessing officer held that the provisions of section 41(1) attracted in respect of the unsecured loan written off. However the honourable High Court held that in view of fact that in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay tax under section 41. This question, therefore, does not require any consideration. (para7) 17. Thus we note that in this case Hon'ble Jurisdictional High Court has noted that it was not established that assessee has claimed any allowance or deduction in any earlier years in respect of any loan expenditure or trading liability. 18. We note that honourable Apex court in the case of Mahindra and Mahindra while upholding the view that provisions of section 41(1) are not applicable in case of waiver of liability incurred in respect of purchase of capital asset has observed as under :- 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 cessatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case accordingly we remit the issue to the file of assessing officer. The assessing officer is directed to give a finding on the utilisation of the working capital loan which has been waived by the bank and thereafter decide as per law. We find that exactly the above direction was given by the ITAT in the case of Wasan Exports (P) Ltd. (supra) :- 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 expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of the benefit accruing it to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to Income Tax as the income of that previous year, whether the business or prof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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