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TMI Blog2021 (7) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... f the principal portion of the loan liability. Hence, the provisions of Section 41(1) of the Act cannot come into operation at all. See MAHINDRA AND MAHINDRA LTD. THRG. M.D. [ 2018 (5) TMI 358 - SUPREME COURT] Disallowance of swap charges on loans obtained by the assessee - HELD THAT:- As the swap charges which the assessee has incurred for conversion from floating to fixed rate of interest, would necessarily partake the character of interest. The interest paid by the assessee when the loan was in floating rate, was duly allowed by the learned Assessing Officer. Hence, the character of the transaction does not change pursuant to this swap from floating to fixed rate. The utilization of the loans for the purposes of business has not been disputed by the learned DR before us, hence, there is no question of disallowance of any interest, whether nomenclature as interest or swap charges. The nomenclature of the transaction is absolutely irrelevant than the substance of the transaction. Thus we hold that the assessee is entitled for deduction towards swap charges. Accordingly, the ground raised by the assessee are allowed. - ITA No. 402/Mum/2014 - - - Dated:- 25-6-2021 - Shri M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt the said rupee loan facility into Secured Redeemable Convertible Debentures aggregating to ₹33.80 crores. In terms of the said agreement, the assessee was to issue Secured Redeemable Convertible Debentures of ₹33.80 crores to Bank of Nova Scotia ; make a payment of ₹9.70 crores (equivalent to USD 2 million) to the Bank ; and there was a remission of the balance rupee loan to the extent of ₹46.50/- crores. The said remission was credited to the Capital Reserve Account of the assessee during the year under consideration. The same was not offered to tax by the assessee while preparing and filing its return of income since the same was a reversal of a capital liability which is not taxable. 6. During the course of the assessment proceedings, the Assessing Officer had inter-alia called upon the assessee to produce all relevant details of the rupee loan facility availed from Bank of Nova Scotia and the restructuring agreement as income of the assessee company under section 41(1) of the Income-tax Act, 1961. The said explanation was filed with the Assessing Officer vide letter dated 6.2.2006. 7. The Assessing Officer however, disregarded the above and made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principal portion of the loan liability. Hence, the provisions of Section 41(1) of the Act cannot come into operation at all. We find that the issue in dispute before us is no longer res integra in view of the decision of the Hon ble Supreme Court in the case of CIT vs. Mahindra And Mahindra Ltd. reported in [2018] 93 taxmann.com 32 (SC), wherein it was held as under:- 14. Another important issue which arises is the applicability of the Section 41 (1) of the IT Act. The said provision is re-produced as under: 41. Profits chargeable to tax.- (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,- (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 benefit accruing to him shall be deemed to be profits and gains of business or prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading 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 court in view of the following reasons: (a) Section 28(iv) of the IT Act does not apply on the present case since the receipts of ₹ 57,74,064/- are in the nature of cash or money. (b) Section 41(1) of the IT Act does not apply since waiver of 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. 18. In view of above discussion, we are of the considered view that these appeals are devoid of merits and deserve to be dismissed. Accordingly, the appeals are dismissed. All the other connected appeals are disposed off accordingly, leaving parties to bear their own cost. 10. We find that the learned DR placed heavy reliance on the decision of Hon ble Jurisdictional High Court in the case of Solid Containers Ltd. Vs. CIT reported in 308 ITR 471 (B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gorical finding that assessee converting the loan from floating rate of interest to fixed rate of interest has derived enduring benefit and hence, the expenditure incurred by the assessee falls in the capital field warranting capitalization thereon and hence, cannot be allowed as deduction under section 37(1) of the Act. 14. At the time of hearing, the learned AR drew our attention to the relevant documents enclosed at pages 290, 290A and 296 of the factual paper book. There is no dispute that these documents were already placed before the lower authorities. The learned AR also drew our attention to page 80 of the case law paper book wherein, the calculation of this swap charges had been reproduced as under:- From To Notional Principal No. of days Fixed rate Floating rate Difference Loss(gain) Dec-00 15-Jun-01 1,95,00,000 182 6,485% 6,464% 0.021% 2,033 15-Jun-01 17-Dec-01 1,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange variation. Even before the Tribunal, we find that there was no submission recorded on behalf of the Revenue that the Respondent assessee should be called upon to explain the nature of its transactions. Thus, the submission now being made is without any foundation as the stand of the assessee on facts was never disputed. So far as the reliance on Accounting Standard-11 is concerned, it would not by itself determine whether the activity was a part of the Respondent-assessee's regular business transaction or it was a speculative transaction. On present facts, it was never the Revenue's contention that the transaction was speculative but only disallowed on the ground that it was notional. Lastly, the reliance placed on the decision in S. Vinodkumar Diamonds (P.) Ltd. (supra) in the Revenue's favour would not by itself govern the issues arising herein. This is so as every decision is rendered in the context of the facts which arise before the authority for adjudication. Mere conclusion in favour of the Revenue in another case by itself would not entitle a party to have an identical relief in this case. In fact, if the Revenue was of the view that the facts in S. V ..... X X X X Extracts X X X X X X X X Extracts X X X X
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