Tribunal Allows Late Appeals, Considers Loan Waiver as Income, Disallows Pre-Op Expenses

The tribunal granted condonation of delay for appeals filed late, admitting them for further proceedings. It held that waiver of loan amount constitutes income under Section 28(iv) of the Income-tax Act, rejecting the argument that it should be treated as a capital receipt. Pre-operative expenses deduction was disallowed as business operations had not commenced. The disallowance of depreciation was not pursued further as the CIT(Appeals) had already ruled in favor of the assessee. Both appeals were dismissed, affirming decisions on the waiver of loan assessment and pre-operative expenses disallowance.

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Issues:
1. Delay in filing appeals and condonation of delay.
2. Assessment of waiver of principle amount of loans.
3. Disallowance of pre-operative expenses.
4. Disallowance of depreciation.

Delay in filing appeals and condonation of delay:
The appeals were filed with a delay of 2 days, and the assessees sought condonation of the delay, which was granted by the tribunal after finding sufficient cause for the delay. The appeals were admitted for further proceedings.

Assessment of waiver of principle amount of loans:
The main issue was whether the waiver of loan amount should be considered as income under Section 28(iv) of the Income-tax Act, 1961. The assessees argued that the waiver of loan should be treated as a capital receipt and not taxable income, citing judgments of the Madras High Court. On the other hand, the Departmental Representative contended that the waiver of loan constitutes a benefit arising out of business and should be assessed as income. The tribunal considered the arguments and upheld the CIT(Appeals) decision that the waiver of loan amount constitutes income under Section 28(iv) of the Act.

Disallowance of pre-operative expenses:
The assessee claimed deduction for pre-operative expenses amounting to &8377;1,81,54,653/-, which was disallowed by the Assessing Officer. The contention was that the expenses were claimed to reduce book profits, but the tribunal found that the business operation had not commenced, and hence, the expenses could not be allowed. The CIT(Appeals) decision to confirm the disallowance was upheld by the tribunal.

Disallowance of depreciation:
The issue of disallowance of depreciation amounting to &8377;20,89,639/- was raised by the assessee, but it was informed that the CIT(Appeals) had already deleted the disallowance, and no further appeal was filed by the Revenue. Therefore, this issue did not arise from the order of the CIT(Appeals) in the assessee's appeal.

In conclusion, the tribunal dismissed both appeals of the assessees, upholding the decisions made regarding the assessment of waiver of loan amount and the disallowance of pre-operative expenses. The issue of disallowance of depreciation was not pursued further as the CIT(Appeals) had already ruled in favor of the assessee on that matter.

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