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TMI Blog2023 (5) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... was capital in nature. Hon ble Supreme Court in the case of Mahindra and Mahindra Ltd [ 2018 (5) TMI 358 - SUPREME COURT] while deciding the issue of waiver of loan, held that for invoking the provision of section 41(1), it is sine-qua-non that allowance of deduction should be claimed by the Assessee in any assessment for any year, in respect of loss, expenditure or trading liability incurred by the Assessee and then subsequently, if the creditor remits or waives any such liability then assessee liable to pay tax u/s. 41 of the Act. Objective behind this section is to ensure that assessee does not get way with the double benefit. Here in this case the loan taken by the assessee was neither an expenditure nor trading liability and therefore waiver of such loan which otherwise was capital in nature, the provision of section 41 (1) cannot be invoked. Waiver of loan amount considered as a benefit u/s 28(iv) - Section 28 (iv) also does not apply, as benefit on waiver of loan was not in the kind of money, i.e., cash receipt. Thus, the Ld. CIT (A) has rightly followed the principle laid down by the Hon ble Apex Court. This principle has been retreated in several judgments on waiver of loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld.AO invoked section 41(1)(a), holding it to be benefit out of cessation of trading liability, that is, the benefit would be deemed to be from profits and gains of business of profession . He also referred to the decision of Hon ble Delhi High Court , in the case of Logitronics P. Ltd. Vs. CIT, 333 ITR 386 (Del) ; Judgment of Hon ble Bombay High Court in the case of solid containers Ltd Vs. DCIT (2009) reported in 178 Taxmann 192 ; and judgment of Hon ble Supreme Court in the case of CIT Vs. T.V.Sundaram Iyengaran 1996, 222 ITR 334 . Finally, he added the amount of loan waived of as Income of the Assessee. 6. The Ld. CIT(A) held that the loan amount taken by the Assessee, does not given rise to any sale or purchase of any goods albeit it will enable to assessee to have buffer amount in case of any exigencies and such amount can be used for anything and not only for the purpose of purchasing of sailing goods. He further held that, Hon ble Supreme Court in the case of Mahindra and Mahindra Ltd ., reported in 2018 93 Taxmann 32, clearly clinches the issue in the favour of the assessee and also quoted the relevant paragraphs of the said judgement. He also referred to the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e principal or interest repayable, or a complete waiver of both the loan as well as interest amounts. Hence, waiver of loan by the creditor results 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 . (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; 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 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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