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TMI Blog2020 (6) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... settlement the same cannot be brought to tax u/s 41(1) because the OCC loan represents the principal which was never claimed as expenditure. AO also did not make out a case that the principal amount was debited to the Profit Loss account in the earlier years. Therefore there is no case for making addition u/s 41(1) in respect of the principal amount. In MAHINDRA AND MAHINDRA LTD. THRG. M.D. [ 2018 (5) TMI 358 - SUPREME COURT] considered the issue with regard to taxing the remission of liability u/s 28(iv) and decided the issue against the revenue and in favour of the assessee, since, the receipt was in the nature of cash or money. The Hon ble Supreme Court held that section 28(iv) has no application since the receipt was in the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that the assessee had received the benefit of ₹ 1,70,00,000/- as a result of one time settlement of loan by the Indian Overseas bank. The assessee was due to Indian Overseas Bank, Visakhapatnam in respect of term loan OCC for a sum of ₹ 4.3 crores which included the interest subsidy as well as the working capital loan. The interest of ₹ 43,81,572/- was added back to income and taxed u/s 43B of the Act. However, the sum of ₹ 1.7 crores which represent the waiver of working capital loan was added as income u/s 41(1) of the Act in the assessment order made u/s 143(3) of the Act. 3. Against the order u/s 143(3), the assessee went on appeal before the CIT(A) and the Ld.CIT(A) deleted the addition following the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly or indirectly for the purpose of acquisition of any capital asset though the assessee claimed that the part of the OCC loan was utilized indirectly for repayment of old term loans availed by the assessee from SBI. 5. The appellant craves leave to add or delete or substitute or amend any ground of appeal before and / or at the time of hearing of the appeal. 5. During the appeal hearing, the Ld.DR submitted that the amount of ₹ 1,70,00,000/- represent waiver of working capital loan which was used for day to day running of the business, therefore, submitted that the same required to be brought to tax u/s 28(i) of the Act. The Ld.DR relied on the following decisions : (a) Hon ble High Court of Bombay in the case of Solid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rused the material placed on record. The AO made the addition u/s 41(1) of the Act, but not u/s 28 of the Act. As per section 41(1) of the Act, trading liability or expenditure or the loan which was already claimed as incurred by the assessee and subsequently during any previous year received the benefit in respect of such trading liability by way of remission or cessation of liability is deemed to be profits and gains of the business or profession and accordingly chargeable to tax as the income of the previous year. From section 41(1), it is observed that there must be trading liability or expenditure or loss which was incurred by the assessee in the earlier years and allowed the same as deduction to tax the same u/s 41(1). The twin condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under Section 36 (1) (iii) of the IT Act qua the payment of interest in any previous year. The Hon ble Supreme Court also considered the issue with regard to taxing the remission of liability u/s 28(iv) and decided the issue against the revenue and in favour of the assessee, since, the receipt was in the nature of cash or money. The Hon ble Supreme Court held that section 28(iv) of the Act has no application since the receipt was in the nature of cash or money. In the instant case what the assessee has received was remission of liability which was in the form of cash or money and the difference amount of pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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